Dallas, TX -- (ReleaseWire) -- 10/29/2012 -- Across all types of metals, we expect subdued growth in both production and consumption in Australia as a weakening global economic outlook, notably China, continue to take its toll on Australia’s commodity driven economy. Although significant additional global monetary stimulus should help to boost metal prices in the near term, the bout of loosening measures will not be enough to stem the slowdown and the medium-term outlook for metals remain weak. For some metals, we forecast a weak recovery in 2012.
The slowdown in the metals industry in Australia is best exemplified by the country’s monthly crude steel production, which has continued to slide into negative territory following positive growth in 2010. Weak demand from slowing domestic construction and a cooling export market will continue to undermine Australia’s steel industry in 2013. Crude steel production is expected to contract by 6.5% in 2013 and national production is unlikely to approach pre-crisis levels for many years. The country’s two dominant steel producers, BlueScope Steel Ltd and Arrium Ltd (previously known as OneSteel Ltd), has embarked on a series of consolidation plans and restructuring programs aimed at reducing operating costs and curbing overcapacity amid an environment of weak demand and declining steel prices.
Back To Contraction
Australia – Monthly Steel Production & % Change y-o-y
Source: BMI, World Steel Association
The majority of Australia’s refined metal output is for export, with Asia and particularly China accounting for the largest share. We therefore assign downside risks to our forecasts on the back of an expected slowdown in China’s economy. Indeed, our views have been playing out well, with the latest purchasing
Australia Metals Report Q4 2012
© Business Monitor International Ltd Page 6 managers’ indices adding evidence that the Chinese economy is already in recession. Moreover, domestic demand for Australia’s refined metal production is dependent on the country’s economic growth rate, which we forecast will be modest until at least 2016. Hence, any reduction in the growth rate would have a detrimental effect on the consumption of metals.
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