April 2024

Industry trends
Metals and SteelA rebound in advanced
markets is on the horizon,
while emerging markets
show weaker performance

Global overview
After a robust 5.7% increase in 2023,
basic metals output is expected to slow
down to 2.2% this year, as productionin China and India has eased.
However, after a contraction last year,
metals output in advanced economies
should slowly rebound in H2 of 2024.
This is due to recovering demand fromkey buyer industries and easing costpressures (energy, commodities, labour).

As the economic rebound gains momentum,
we expect 2025 advanced markets’ metals
production to increase by 4.4%. The sector
should benefit from the lagged effect of
expected monetary easing and the endof the de-stocking cycle. However, on a
global level 2025 metals output growth
will stagnate at 2.1%, mainly due to a
slowdown in China.
Good prospects for non-ferrous metals
In the medium-term, metals and steel
performance will be affected by how

successful China is in pivoting the economy
away from investment-led growth throughcapacity closures. Another factor is theextent to which carbon tariffs can support‘greener’ production. The emphasis on
reducing carbon emissions could help prop
up production in less profitable regions,such as Western Europe. Sustainability-led
demand for non-ferrous metals like copperand aluminium should lead to higher sales
prices and margins in this segment.

Industry performance forecast
Europe1Asia and Oceania

Americas

Austria

Netherlands

Australia

Philippines

BrazilBelgium

PolandChina

Singapore

CanadaCzech Republic

PortugalHong Kong

South Korea

MexicoDenmark

Slovakia

India

TaiwanUSAFranceSpainIndonesia

ThailandGermany

SwedenJapan

UAE

Hungary

Switzerland

Malaysia

VietnamIrelandTurkeyNew Zealand

Italy

UKExcellent
The credit risk situationin the sector is strong /business performance in thesector is strong compared toits long-term trend.
GoodThe credit risk situationin the sector is benign /business performance in the
sector is above its long-term trend.
Fair
The credit risk situationin the sector is average /business performance in the
sector is stable.
PoorThe credit risk in thesector is relatively high /business performance in thesector is below its long-term trend.
BleakThe credit risk in thesector is poor / businessperformance in the sector is weakcompared to its long-term trend.

April 2024

Industry trends
Metals and SteelBasic metals output:
Global and per region

2022

Global

0.4

2023

2024*

2025*

Basic metals output:
Output per subsector

2022

2.2

2.1

Basic metals all

0.4

5.7

Americas

-1.4

-1.1

1.9

3.7

Asia PacificEurope-4.7

-1.5

2024*

2025*

2.2

2.1

2.0

2.2

2.7

1.7

1.7

3.3

5.7

6.1
Iron and steel-1.2

8.4
1.6

2023

2.2

2.0

Non-ferrous
metals

2.7

2.1

1.3

Casting

0.7

6.0

1.5

Year-on-year, % change /*forecast – Source: Oxford Economics

Year-on-year, % change /*forecast – Source: Oxford Economics

Strengths and growth drivers

Constraints and downside risks

Green metals and steel. Demand for green metals and steel isgrowing, particularly from EV manufacturers as they increasingly
include Scope 3 emissions within decarbonisation strategies.
(These are the carbon emissions generated in the production ofvehicle materials.)

Clean energy transition. Transitioning to greener production
carries high capital intensity and costs, which can be compoundedby difficulties in sourcing finance (especially for smaller andmedium-sized businesses). Many could find it difficult to pass
on higher costs to customers.

Increased competitiveness. Increased demand for green metals
and steel by automotive and also areas such as wind turbine
production, means green producers can gain a competitive
advantage over manufacturers that are slower to transition.

Overcapacity. Historically, the steel industry has been seen asvital to national interests, and domestic production has beenencouraged and protected. But increased globalisation has led toexcess capacity and consolidation has been slow. China, the biggest
contributor to overcapacity, has only recently started to shut down
excess capacity.

Emerging markets. Growing urbanisation is driving demand
for new housing and infrastructure improvement projects.
This is resulting in increased demand for metals/steel fromconstruction businesses in emerging markets.

2

Supply chain issues. Securing and developing sustainable supply
chains can be a challenge, especially for mining, transportationand materials processing. This could lead to sourcing andcommodity deficits for metals and steel producers.

April 2024

Metals and Steel outlook
Americas
Basic metals output

2022

2023

2024*

2025*

Brazil

-3.8

-2.6

0.0

2.6

Canada

0.7

-1.6

0.2

3.7

Mexico

3.7

0.5

0.2

0.5

CanadaUnited States

-2.3

-1.0

3.2

4.5

MexicoYear-on-year, % change /*forecast – Source: Oxford Economics

USA

CanadaNo recovery yet

We expect US basic metals output to increaseby 3.2% in 2024 and 4.5% in 2025. The sector
benefits from a solid economic performance,with GDP forecast to grow 2.4% this year.

We expect basic metals output to increaseby only 0.2% in 2024 after a 1.6% contraction
last year. Weak domestic demand and highinterest rates are having a negative impact
on the steel segment, and higher input costs
are affecting businesses’ margins.

Energy prices are much lower in the US
than in other regions, due to the size of US
domestic energy production. Therefore,
US metals and steel producers have acompetitive advantage over their peers
in Europe and Japan.

3BrazilUSA

A rebound after two years of contraction

The Infrastructure Investment and Jobs Act
is providing stimulus for metals and steel
consuming sectors. In the infrastructure
segment, power plant projects continue togrow in order to ensure energy resilience.
In addition, energy and sustainability
projects driven by the Inflation Reduction
Act will sustain metals and steel demand.
The government is developing domestic
critical mineral capacities, which will benefit
non-ferrous metal production. That said,
steel prices are currently low and labour
expenses remain high, putting pressure
on the margins of steel producers.

Industry performance forecast

The non-ferrous metals subsector has fared
somewhat better, due to higher sales prices.
In line with an expected economic rebound,basic metals production is forecast to grow
3.7% in 2025.

Excellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.
GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

April 2024

Metals and Steel outlook
Asia Pacific
Basic metals output

2022

2023

2024*

2025*

China

3.4

8.7

2.0

-0.2

India

2.5

18.1

2.7

6.2

Japan-5.6

-3.9

1.2

7.0

South Korea-8.4

3.80.4

3.8

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Australia
China
Hong KongIndia
Indonesia

China

India

A contraction expected for next year

Growth to accelerate again in 2025

We expect Chinese basic metals output
growth to slow down to 2% in 2024 (after
it was up 8.7% in 2023) and to contract by
0.2% next year, due to weakness in the steel
segment. Steel supply exceeds demand,
putting prices and margins under increasingpressure.

We expect Indian basic metals output
growth to slow down to 2.7% this year after awhopping 18% increase last year. Metals andsteel demand are impacted by an economic
slowdown and monetary tightening.
However, the country´s rapid economic
development, urbanisation, and growing
population will sustain metals and steel
production in the mid to long-term.
For 2025 a 6.2% growth is forecast.

Steel producers are suffering from theongoing liquidity woes in the property sector
and the wider economic growth slowdown.
At the same time the government has not yetstrictly enforced its policy of curbing output
for environmental reasons, as it wants toshore up economic growth.
The non-ferrous metals subsector is faring
better, as the government prioritises
advanced manufacturing, electric vehicles
and renewable energy production. However,there are overcapacities in some segments
like nickel and copper. Aluminium output
is close to the 45 million metric ton cap thegovernment set in 2017.

JapanJapan
Malaysia
New ZealandPhilippines
Singapore
South Korea
TaiwanThailand
UAE

Only a modest rebound in 2024

Vietnam

After a sharp contraction in 2023 and 2022,
we expect Japanese basic metals output
to grow by 1.2% in 2024, as demand fromautomotive and construction rebounds
over the course of the year. Lower energy
costs will support the recovery, but external
demand remains weak for the time being,
while cost pressures weigh on the sector in
the medium term.

Excellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.
GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
FairThe credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

4April 2024

Metals and Steel outlook
EuropeBasic metals output

2022

2023

2024*

2025*

France-5.8

-7.8

7.3

6.9

Germany-4.6-1.7-3.2

2.9

Italy

-8.4

-5.9

3.5

7.1

United Kingdom-8.1

5.2

-10.2

-10.0

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Austria
Belgium
Czech Republic
Denmark
FranceEurozone and UK
Higher energy prices affect competitivenessAfter a 2.1% contraction in 2023 we expect
Eurozone basic metals output to shrink
again this year, by 0.5%. Eurozone economic
growth remains a feeble 0.6%, with highinterest rates, weak external demand andan industrial recession dampening metals
demand. We expect a gradually recovery ofmetals performance in H2 of 2024 as costpressures subside and industrial demandrebounds.
For 2025 basic metals output is forecast to
increase 3.4%. Despite decreased gas prices,
Eurozone metals and steel producers facea permanent competitive disadvantage
compared to other countries in terms ofenergy costs. That said, the introduction of
the carbon border adjustment mechanism
should provide some support to domestic
producers in the medium term.

Germany
We forecast basic metals production to contract
again in 2024, by 3.2%, with the steel segment
declining 4%. Steel demand remains subdued
and prices have deteriorated, putting pressure
on margins. While basic metals output isexpected to recover in 2025, a full reboundto pre-pandemic levels is not in the cards.
Higher energy costs and investment in cleaner
production capacity are major challenges.

Italy
Basic metals production contracted sharply
in 2022 and 2023 due to weak demand andhigh costs. We expect basic metals production
to increase by 3.5% this year in line with an
economic recovery, but any lagging impacts ofthe expected monetary easing in the eurozone
remain a downside risk.

United Kingdom
Basic metals and steel output are expected
to decrease at double-digit rates in 2024 and2025. The main reason is the announcementof Tata Steel and British Steel to replace theirblast furnace mills with electric arc furnaces.
Non-ferrous metals production in the UK willcontract by 1.7% this year, impacted by highenergy costs and subdued economic growth.
Brexit has reduced access to EU markets formetals and steel businesses as well as for enduser industries.

Germany
Hungary
Ireland
Italy
Netherlands
PolandPortugal
Slovakia
SpainSwedenSwitzerland
TurkeyUKExcellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.
GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

5April 2024

Atradius
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P.O. box 8982 · 1006 JD Amsterdam
The Netherlands
Phone: +31 (0)20 - 553 91 11
info@atradius.com
www.atradius.com

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