New Market Report: Canada Metals Report Q3 2012

New Materials market report from Business Monitor International: "Canada Metals Report Q3 2012"

by Bill Thompson

(WireNews+Co) - Boston, MA - 22 October 2012

While the Canadian metals market is set to be an outperformer, consumption growth will be insufficient to sustain output growth in 2012 with the US market set to determine production, according to BMI's latest Canada Metals Report. As such, some segments will see slower growth and even a contraction, particularly where plants are affected by labour disputes.

Canada is the world's sixteenth-largest steel producer. Canadian crude steel output decreased by 1.0% to 13.1mnt (million tonnes) in 2011, despite a 10% rise in apparent finished steel consumption to 17.3mnt. A deal between US Steel and the Canadian government could stimulate output, but in light of the deteriorating economic conditions and the potential for over-supply particularly in the US flat steel market, we have revised down our output growth forecast from 10% to 4.9% for 2012 to reach 13.7mnt. A strong Canadian dollar during most of 2011 also likely spurred imports and decreased incentive for increased domestic production.

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In January 2012, Rio Tinto Alcan announced that it would operate its 438ktpa (thousand tonnes per annum) Alma aluminium smelter in Saguenay-Lac-Saint-Jean, Quebec at one-third capacity. It is engaged in a dispute with workers over union demands to limit the use of subcontract workers and guarantees of a certain number of union jobs at the plant. Bringing 50ktpa of capacity back online at Shawinigan will be insufficient to make up for the loss of around 290,000tpa of capacity at Saguenay-Lac-Saint-Jean. This along with the impact of a more difficult operating environment with falling prices, weakening sales and rising costs will lead to a moderate 2% increase in primary aluminium output to 3.3mnt in 2012.

Nickel refining has been undermined by the effects of labour disputes on ore mining activities with 12.2kt (thousand tonnes) of planned finished nickel output lost due to a shut-down of a facility operated by Vale. We expect refined nickel output to increase by 4% in 2012 to reach 148kt. Production is projected to reach 162kt tonnes by 2016. A significant risk to this forecast comes from doubts over the commercial viability of Vale's complex in Thompson with 55ktpa (thousand tonnes per annum) refining and 60ktpa smelting capacities.

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