Romania will produce raw steel/raw steel goods [code 72] only for local processing or consumption [and not for exports]; the industry has a potential for growth that depends on the construction sector mainly – but also on the exploitation of high value-added segments now delivered only by exports [for which investments are needed]. Provided the EU/local government turn more supportive to energy-intensive industries, such investments would make sense economically.

Under current circumstances however imports of raw steel goods might increase from neighbouring, non-EU countries such as Ukraine. The business model adopted by local steel industry will critically depend on the energy policies. Electricity and natural gas prices in Romania are lowest in the EU. While the electricity prices have increased significantly as a result of the renewable energy support, the natural gas price is likely to increase in the coming couple of years as the gas market is liberalised. Shale gas abundance is far from imminent in Europe and the carbon cut policies are making energy-intensive industries even less profitable.

Romania’s crude steel output increased gradually from 5.5mn tonnes in 2002 to nearly 6.3mn tonnes in 2006-2007. It further plunged to below 2.8mn tonnes in 2009 amid deep recession and inventory effects, but returned meanwhile and has stabilised to around 3.7-3.8mn tonnes in 2011-2012. The output of raw steel goods followed a similar pattern and stabilised around 3.2-3.5mn tonnes [2012 data is still not final – the 8.3% y/y decline calculated by us for the year might have been lower].

What has essentially happened is that local steel mills stopped producing raw steel goods for export – since this business model is now no more cost-effective. From a net export of 2mn tonnes of raw steel goods in 2003, Romania turned to a net importer with nearly 0.5mn tonnes. Net balance of processed goods returned in the surplus area after strong demand in the pre-crisis years pushed it into the deficit area.

The domestic intake of steel goods [either raw or processed – but used domestically] has surged from 2.65mn tonnes in 2002 to 5.75mn tonnes in 2007 to shrink at 3.14 mn tonnes in 2009. Please note that the 2009 steel intake was still well above the 2.65mn tonnes intake in 2002. Steel intake further strengthened to above 3.5mn tonnes in 2011-2012. We expect it to increase more or less moderate – depending on the expansion of construction sector essentially and of ArcelorMittal Galati commitment of taking advantage of the abundant demand generated by the automobile sector. The wind power sector remains a potential customer for local steel makers – shipyards, but not as much as it was in the past years.