Production in Bulgaria exceeded its pre-pandemic levels in March, industrial turnover grew at a two-digit rate on both a monthly and yearly basis, and the monthly volume of exports hit a record high of 5.7 billion levs (2.9 billion euro), National Statistical Institute data show.
One of the reasons for the robust growth is the low base in March 2020, when the pandemic broke out, although a more substantial drop was only reported in the second quarter of the year. Industrial inflation is also a factor: the prices of essential raw materials like crude oil, copper, aluminum and steel are on the rise. Foreign demand is also increasing, which is an important growth driver for a small economy like Bulgaria's.
The upsurge is also evident in the results of listed industrial enterprises in Bulgaria. Most big companies report a two-digit growth in sales in the first quarter on the back of market recovery and increased demand. The projections for the coming months are optimistic.
Bulgaria's commodity exports surged 27% in March, year on year, with the rise reaching nearly 30% in exports to the EU and 22% in sales to third countries. On the one hand, that is not a surprise, given that in March 2020 exports shrank 8%. Inflation is also a factor. Statistics show an increased export of ferrous metals but industry data reveal more or less flat volumes. "The rise in steel exports was due to higher prices. Overall, there is market for steel," said Bulgarian Association of the Metallurgical Industry CEO Politimi Paunova.
The price of oil has tripled compared to its year-ago bottom and that of copper is now nearly twice higher. That partially explains why Bulgaria's copper exports to third countries grew 54% to 259 million levs in March and those of fuels rose 45%, while quantities decreased.
Demand is also on the rise.
The IHS Markit eurozone manufacturing PMI reached a record high of 62.5 points in March and 62.9 points in April, driven by strong growth in production, new orders and export. "In recent months Germany's goods and automotive exports are in a better position than in the second half of 2019. One of the reasons for that is demand from China and Vietnam," said Institute for Market Economics chief economist Lachezar Bogdanov, commenting on the largest market of Bulgarian export-oriented companies.
Another factor is the United States, where government stimuli are encouraging both demand for raw materials and domestic consumption.
In Bulgaria, copper producer Aurubis saw an increase in output. "Cathode sales, which are directed mainly to third countries, rose 5 to 8% in March. Overall, we witness market recovery," the company said.
Aluminum product exports to third countries doubled in March, driven by both higher prices and stronger demand. Local manufacturer Alcomet increased its sales to third countries from 0.4% to 11%, with the bulk of them going to the United States.
"That was due to bigger volumes and not to inflation," the company said, adding that was part of its market diversification strategy. "Sectors like construction, e-vehicle production and green energy projects have drastically boosted consumption of aluminum products," Alcomet's report reads.
Manufacturers of machines and automotive components also report rising sales. "March was a record month for the company, with exports in the first quarter exceeding plans by 10%," automotive locking system producer Witte Automotive Bulgaria's manager Hristo Hristov said. In his words, all markets contributed to the growth: the EU, China and the United States.
Plovdiv-based automotive lighting system manufacturer Odelo Bulgaria also reported a substantial increase in sales in March: 25% year on year. The company said the main reason was the expansion of its client portfolio and the launch of new projects.
The explosive growth however comes with some risks. According to Witte Automotive's Hristov a major challenge is the global shortage of certain materials (electronics, metals), which makes OEMs periodically suspend production.
It should also be noted that while some sectors are already recovering, others are yet to feel the effects of last year's crisis, e.g. shipbuilding subcontractors. "Machine building is recovering with a certain delay because of its longer production cycle. If there was a drop in orders in 2020, it will be felt this year," said Trakia Tech's manager Georgi Stoev.