Prague - The golden age of the Czech steel sector is over and is not coming back. Even though Czech steelmakers are expecting a mild recovery in 2014, steel production will not reach the pre-crisis level. The companies will have to introduce more cost-cutting measures and production halts, according to a report by Steel Federation, a Czech union of steel producers. The report outlines the estimated future development of the Czech steel sector between 2013 and 2015.
Czech steelmakers will continue to swim against the global stream in the said period. The global metallurgical sector, thanks to production in Asian countries, already returned to the pre-crisis level in 2010. In the Czech Republic, production of steel is still only at 75 percent of the 2007 level.
From 2011 to 2012, production of raw steel dropped in the Czech Republic from 5.6 million tons to 5.1 million tons, with revenues decreasing by CZK 14 billion (EUR 540 million) to CZK 93 billion. The report expects revenues to stay at this level in 2013 and increase only modestly in 2014.
"The development of the steel sector since 2008 shows that this is more than a common cyclical crisis of the industry. Everything indicates that the segment is going through a structural change. We cannot expect to get back to the pre-crisis level anymore," said Steel Federation vice-president Jaroslav Raab.
The expected modest recovery will not start at least in another six months, which means that more investments will be postponed and production further reduced this year.
But there will not be any massive layoffs in 2013, after the number of steel sector employees decreased by 6.5 percent in 2010, 5 percent in 2011 and 7.3 percent in 2012.
EU and Czech laws on renewable energy and limits on steel production constitute a further drag on the sector. Steel production in the Moravian-Silesian Region is subjected to some of the strictest output limits in the entire EU. Since 19934, Czech steel makers have invested CZK 94 billion to make their operation more eco-friendly.
Between 2010 and 2020, the companies will also pay CZK 20 billion in renewable energy fees and spend another CZK 7.1 billion on emission permits, says the report.
Consumption of steel products in the Czech Republic decreased by 5 percent in 2012 to 5.8 million tons. According to optimistic estimates, the figure may increase to 6.4 million tons by 2015.