[

What’s ahead for the metals industry in 2009? KPMG survey reflects on the industry’s response to the economic downturn.

Date: 29.07.2009

Company: KPMG Česká republika, s.r.o.

Are we still in the midst of metals commodity super-cycle, albeit with a slowdown, or is the industry resetting itself? Is the slowdown in the real economy likely to prevent any meaningful recovery for the metals industry in 2009?

Main findings of the study:

Global steel production peaked in May 2008 and then began a steep decline with a 4 percent drop in September and a 12 percent drop in October. BRIC countries were not immune to the drop either.
Reduced production led to price drops.
Steel prices have dropped approximately 60 to 70 percent since 2007, and they are not expected to increase by more than a few percentage points in 2009.
Industry observers are generally pessimistic about demand recovery for the metals industry in the months ahead – as a result, companies are looking for ways to optimize costs.
The EU is working to make renewables 20 percent of total energy demand by the year 2012. The EU has also announced the goal of reducing CO2 emissions by at least 20 percent by 2020.
The steel industry is also planning a number of environmental initiatives at the global level and the metals industry will continue to face significant regulatory challenges, especially in efforts to achieve a global approach to greenhouse gas (GHG) controls.
Many companies are increasing the forward visibility and control of their cash flows, helping to support a sustainable, long-term release of cash and working capital.
Companies are working to develop a more balanced focus on cost and organizational capability and finding new opportunities in treasury, tax, property, and other assets to release trapped cash.
Companies are looking for cheaper alternative raw materials and energy efficiencies and are looking into vertical integration.
Industry consolidation has been halted by the lack of available credit.
The general consensus across the metals industry is that 2009 will be a challenging year, with limited growth, uncertain demand, and prolonged financial stress.