South East Asia Iron & Steel Institute has announced that, amidst the fluctuating steel price movement, many steel companies reported significant drops in earnings in the first two quarters of 2009.
According to World Steel Dynamics, average EBITDA of steelmaking company composite results registered a significant decline from the peak of USD 241 per tonne in the third quarter of 2008 to USD 30 per tonne in the first quarter of 2009 and USD 25 per tonne in the second quarter of the same year. However, EBITDA per tonne recovered in the second half of 2009 and the first two quarters of 2010.
In general, the non Chinese steel industry registered a higher recovery rate in EBITDA per tonne when compared to the Chinese steel industry. It is estimated that EBITDA per tonne in Q1 2010 picked up significantly and may hold at the same level in the second quarter of 2010, benefiting from the higher steel prices. Although the recovery momentum may slow down in the second half of 2010, the growth for the whole year will still be significant.
As for the profit outlook in 2011, the non Chinese steel mills are expected to perform better to almost double that of 2009 while the Chinese mills' EBITDA is forecasted to increase by almost 40%. This is not only due to the benefit from higher steel pricing and higher sales volumes; but also because more companies will be better positioned in management. The ongoing turmoil in the industry provides opportunities for a steel company to find profit niches and take immediate actions to boost its competitive standing. This also includes the development of new technologies which many companies will have to take into consideration in order to increase profit opportunities.
The Chinese mills seem to generate less EBITDA per tonne than companies outside of China. The profit outlook for Chinese mills is not favorable on a longer term basis. One of the reasons is the expected slower demand growth after 2011 or 2012 in China. More importantly, the Chinese government will not permit the Chinese mills to become sizable exporters, as evident from the rescinding of export tax rebates.
North America was most affected by the steel industry turmoil and was the only region which suffered a negative EBITDA per tonne in 2009. In the long term, World Steel Dynamics predicted that other major Asia, which includes Middle East and North Africa, Korea, India, Malaysia, Thailand and Philippines, will enjoy the highest EBITDA per tonne, which is forecasted at USD 378 per tonne in 2015. South America's EBITDA per tonne was maintained at above USD 250 from 2006 to 2008 but dropped to USD 237 per tonne in 2009. On the average, World's EBITDA per tonne is projected to surge to USD 158 in 2015.
(Sourced from www.seaisi.org)
