German Steel Scene Improving

Income from the football World Cup, according to one analyst, could add one-third of 1 percent to Germany’s gross domestic product this year. But while football fans from around the world gather in Germany this month to follow their national teams, other factors are helping to propel the country’s steel industry and its domestic market forward.

The recent strong showing of the economy is somewhat surprising. When chancellor Angela Merkel formed her government last year there were few expectations that it could engineer an economic turnaround. But we are now seeing a revival of the construction sector, an upturn in manufacturing, and stronger domestic consumption – which does not seem to have been restrained by increases in Euro interest rates.

Steel production and consumption are running higher than in 2005. German steel output was depressed in the early part of this year by a melting shop accident at a plant in Duisburg which lost some 300,000 tonnes of production. But that deficit has now been made up. May’s national production of 4.02 million tonnes of crude steel was a remarkable 9 percent ahead of the same month last year.

Activity in German steel-using industries is accelerating. At the start of 2006, projections were for a 2 percent increase in national steel demand this year. But the producers’ federation WV Stahl has recently raised this forecast to 2.5 percent - with demand from the mechanical engineering sector expected to grow by as much as 5 percent.

Confidence in the steel sector is buoyant. ThyssenKrupp, the country’s largest manufacturer, is planning a multi-billion programme of capital expenditure. It recently gave the go-ahead to build a greenfield plant in Brazil to produce slabs for export – and has scaled up the capacity of this proposed plant from 4.4 to 5.0 million tonnes per year. ThyssenKrupp is also planning to spend almost a similar amount on enlarging its presence in North America.

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