Polish steel stockholding industry

POLISH STEEL MARKET
The Polish steel market in 2006 amounted to ~10.3 mt finished steel products. The Polish steel market is therefore just a little smaller than the steel market in the UK [2006 apparent demand ~12.9 mt] although the Polish population is significantly smaller.
– Poland 38.1 million
– UK 60.5 million

Recently, Polish steel demand is growing fast.
– 2006 demand was ~28% up on 2005
– 2007 demand [based on H1 2007 data] is estimated at ~12mt
– 2007 consumption will be ~17% up on 2006
- Statistics describing steel market demand are shown in the presentation attached.
- Routes to market [direct and via intermediates from production and imports] are shown also.

SERVICE CENTRE SECTOR OVERVIEW
Currently ~100 ‘players’ with gradually diminishing distinction between the stockholder and the service centre.
- Across the 100 firms, multiple sites [especially for larger sites] mean that across Poland as a whole there are perhaps ~250 locations where customers may purchase steel / get access to simple mechanical services such as cutting. - Largest stockholders / distributors include ThyssenKrupp Energostal, Grupa Polska Stal, Sambud-2, Bowim, Stalexport.

GROWTH PROSPECTS FOR STEEL STOCKHOLDING IN POLAND
Polish steel market has been growing fast. MCI assess that a pause in growth will be probable in 2008, but that subsequent moderate demand growth will continue.
- Current West European steel demand is ~412 kg/capita. In Poland it amounts to ~270 kg/capita.
- If half this difference was eliminated in 5 years, Polish demand intensity would increase to ~340 kg/capita, predicting overall steel demand of 12.8mt by 2012.
- With steel deliveries via intermediaries maintained at ~40%, total SSC mediated sales would rise from ~4mt in 2006 to 5.1mt in 2012.

COMPETITION
Events of last three years can be summarised in terms of 
– The move away from the highly fragmented industry structure of the late 1990s
– Merger and consolidation, with Zlomrex leading the field
– Much foreign investment [even by traditionally very risk averse firms]
- In sectors/applications: including auto, white goods, construction, roofing
- In high value steels including alloy, stainless
- In product specific SSCs [heavy plate, coated steels, rebar]
- Broadly, in keeping up with needs of Western investors

Since 2005, we are witnessing much reorientation of the typical 'Polish steel depot' as follows:
 from 'Stockholder' ... to 'Stockholder Plus' ... to 'Service Centre'.

WEAKNESSES
Number of players at 250+ suggests that high competition, poor margins and small average size [sales under 10kt/year] are likely to be key weaknesses.
Know-how in terms of sophisticated add-on services / advanced customer needs is also judged by MCI to often be problematical
Market understanding also is likely to be:
– Often limited;
– Typically highly local;
– Typically lacking broader / international perspective
Access to capital also considered to be a significant weakness for many smaller operators

Can MCI help you develop your presence in the Polish steel sector?
Can we provide an update of the slides above?
Further detailed or regional analysis?
Polish customer assessments?
Review or optimisation of your entry strategy?
Some introductions? If so, please call MCI on
Office : +44 208 504 2805
Email: MCI@steelonthenet.com
Website: please visit http://www.steelonthenet.com/consulting.html

For copy of this presentation, see pdf attachment or slide report.