Canada Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's metals industry.

Canadian steel and aluminium producers are witnessing a steady, but as yet unspectacular recovery determined largely by trends in the US economy, according to BMIs latest Canada Metals Report. In the January-May period, Canadian crude steel output was up 56% year-on-year (y-o-y) to 5.43mn tonnes, with monthly output consistently above 1mn tonnes a level not achieved since October 2008. However, capacity utilisation remains at around 75-80% and BMI believes the situation will not change significantly over H210, with the automotive and construction industries unlikely to rally any further. Nevertheless, this should be enough to bring total crude output to 12.94mn tonnes, up 15.6% y-o-y and an upwards revision from the 10.3mn tonnes we forecast in the previous quarter.

The recovery in demand is coming sooner than we had anticipated and we expect apparent finished steel consumption to reach 12.50mn tonnes in 2010. Canadian steel product shipments grew 23.3% y-o-y in May to 463,000 tonnes, bringing for total for the first five months to 2.36mn tonnes, up 14.4% y-o-y. Month-end steel product inventories totalled 1.39mn tonnes, up by 23.9% y-o-y and equal to three months supply. Aluminium is likely to follow a similar trend. In May, Canadian metals service centre shipments rose 11.6% y-o-y to 11,200 tonnes of aluminium products, according to the Metal Service Center Institutes Metals Activity Report. This brought shipments for the first five months of the year to 56,000 tonnes, up 3.9% y-o-y.

Inventories at the end of May were up 6.0% y-o-y to 32,800 tonnes, equal to 2.9 months supply. However, 2011 should mark a slowdown in growth before a further surge in 2012, as the anticipated slowdown in the US economy has knock-on effects on the Canadian industry.

North American steel prices are likely to decline in H210, which, coupled with the massive rise in raw material costs, will undermine profitability. Although mill output has improved considerably compared with 2009, a lack of optimism over the sustainability of Canadian consumption as well as fears of a slowdown in the US is holding back purchases. Hot-rolled plate demand in Canada has been sluggish, with growth largely in wind energy and bridge construction sectors leading to resistance to price growth. In contrast, cold-rolled coils have seen transaction values rise, while domestic producers have managed to compete effectively against imports, although it is unlikely that prices will rise further in H210. Growth in the North American automotive industry and among manufacturers of domestic appliances has helped fuel a recovery in coated coils, but only hot-dipped galvanised coil has seen a significant increase in prices, while other transaction values have been slow to rise due to foreign competition. Tight supply in wire rod on the US market could help Canadian producers bottom lines, offsetting poor domestic performance. Prices are also static in other construction-related products such as sections, beams and rebar.

Prospects are subdued, with progress expected to be modest throughout 2010. The steel industry will emerge from the current crisis increasingly focused on the emerging economies for growth. In terms of aluminium market demand, rising automotive sales within the North American market and increasingly stringent import and export laws over the last quarter will certainly ease the pressure on Canadian manufacturers; however, much has yet to be done to reach the levels witnessed within the aluminum markets only two years ago. Yet BMI does not believe there will be a return to pre-recession levels, with some capacity likely to come offline permanently. As such, crude and hot-rolled output will be 4.0% and 3.5% down on 2008 levels at 14.52mn and 13.85mn tonnes respectively by 2014. At the same time, domestic finished steel consumption should return to the levels more typical of those seen before the recession, at around 15.2mn tonnes.

Key Topics Covered:

• Executive Summary
• SWOT Analysis
• Global Market Overview
• Forecast Scenario
• Economic Activity
• Global Assumptions
• Country Snapshot: Canada Demographic Data
• Methodology

Companies Mentioned:

• Rio Tinto Alcan
• ArcelorMittal Dofasco
• US Steel Canada

For more information visit http://www.researchandmarkets.com/research/9a7269/canada_metals_repo