Polish distributor expects demand growth despite economic slowdown

Top-three Polish distributor Konsorcjum Stali (KS) expects continued steel demand growth in 2019, despite the forecasted slowdown in economic growth.

Following very strong, 5.1% growth in 2018, Polish economic growth is forecast to slow to 3.6% in 2019 and 3% in 2020. The main factors behind this are falling external demand resulting from global economic uncertainty. Worsening sentiment among entrepreneurs and investors is translating into delayed investment and buying decisions.

2018 saw Polish steel consumption reach 14.8 million tonnes, the highest since 1989, while the Polish Steel Association estimates 2-3% on-year growth in the coming years.

Steel demand in 2019 will also be generated by large investments in the energy sector, the modernisation of the railway network, and infrastructure projects. Also significant will be investments into new rolling stock and shipbuilding.

Overcapacity, however, remains an issue that could depress prices. EU safeguards, introduced in response to US Section 232 measures, “…will unfortunately not fully prevent increased imports and additional steel product supply, which will unfavourably impact the EU and Polish markets,” KS says in a report seen by Kallanish.

KS increased sales 7% on-year in 2018 to 682,000 tonnes. Rebar sales rose 20% to 201,000t and sheet sales were up 7% to 74,000t. Z and G sections sales were flat at 60,000t. Sales of KS-produced or processed products, meanwhile, fell -2% to 236,000t.

KS’s revenue was up 19% in 2018 to PLN 1.83 billion ($483.98 million) but net profit rose only 3% to PLN 43m due to higher cost of goods sold. Domestic sales accounted for 99.45% of revenue, unchanged from 2017.

Celsa Huta Ostrowiec and CMC Poland accounted for 22.04% and 17.5% respectively of KS’ procurement in 2018, each down on-year, with Riva Stahl accounting for 10.04%.