Q1 Metals demand from German carmakers to increase

Newswire

* Strong metal demand in Germany attracts offer from abroad

* Volkswagen to hit record car sales in 2011

* Outlook for the rest of 2012 uncertain

By Silvia Antonioli

LONDON, Nov 30 (Reuters) - Demand for steel and metals from German carmakers will increase in the first quarter next year as car sales to developing countries continue to grow, industry sources told Reuters.

The outlook for the rest of 2012 however remains uncertain as weakening consumer confidence in Europe and a growth slow down in China may hit sales later next year.

"Metals demand from carmakers in Germany is likely to increase in the next few months. Maybe not for very long but at least in the first quarter," a source close to Volkswagen said.

"It is because they are selling more outside of Europe. Growth is mainly coming from China, Russia and Brazil."

The metals that are more likely to benefit from robust car sales growth in developing countries are copper, lead and galvanised and stainless steel which are used to produce more basic car models.

Aluminium on the other hand, is mainly used for higher-end vehicles marketed in more developed areas such as Europe and Japan, where growth is weaker.

BMW and Volkswagen both reported robust vehicle sales growth in October as demand from abroad, China in particular, offset a slowdown in Western Europe.

The Volkswagen group expected 2011 will be its best year so far as it forecasts it will sell at least a record 8 million cars this year, up from 7.2 million in 2010.

HOLIDAY SHUTDOWNS

Germany's BMW and Volkswagen will close most of their plants for only a few days during the Christmas and New Year holiday period, an indication that demand for their cars and therefore their metals and steel consumption remains healthy.

When car demand weakens, producers tend to lengthen the plants shutdowns around the holiday period.

"Demand is still very high; that's the reason why the shutdowns will be rather short," Jochen Frey, director, corporate Communications BMW Group told Reuters.

BMW's German plants in Munich and Regensburg and the Spartanburg plant in the United States will close only for one week between Christmas and New Year.

The plant in Oxford, UK will close for one and a half week for maintenance and that in Leipzig, Germany will close for 4 weeks due to maintenance works and to prepare production of the new BMW 1-series vehicle.

Volkswagen will halt car production at most of its plants for about 10 working days while its components producing plants will work throughout the holiday period, similar to last year, when car sales were also healthy.

During the break at car producing plants the company will implement a new modular toolkit system which will standardize the production process for all cars and reduce costs, Christoph Adomat a spokesman for the company said.

"This is going to be a record year and of course we need a break to fill our pipelines and to prepare for production with this new modular toolkit system," he said.

"Of course if you produce 800,000 more cars your steel and metal consumption has to increase."

Strong metals demand in Germany has attracted offers from elsewhere in Europe where consumption is weaker.

The CEO of Riva Group, Italy's largest and Europe's third-largest steelmaker, said last month that as steel demand from carmakers has decreased in Italy his company was selling more steel to German car producers in the last few months.

French steelmakers have also been affected by weaker demand.

Renault and PSA Peugeot Citroen have taken advantage of French national holidays in November to temporarily close a number of plants in a move to cut inventories. (Editing by William Hardy)

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