Montenegro's industrial production increased 22.4% y/y in May, speeding up from a 14.2% rise the month before on the back of growing utilities output, which offset falling manufacturing and mining and quarrying production, the statistics office said. In monthly terms, however, industrial output shrank 20.7% in May, swinging from a 10.6% m/m increase in April.

The annual decline of manufacturing production in May narrowed to 6.3% from 28.0% the previous month as falling basic metals output was partly offset by  rising food, beverages and pharmaceutical products output. The mining and quarrying production remained in the red in May, shrinking 11.5% y/y, due to lower coal and lignite extraction. The drop in manufacturing and mining and quarrying, however, was largely offset by surging utilities production in May (up 133%), marking its eight straight monthly expansion.

Montenegro's industrial output dropped 7.1% in 2012, due to weak manufacturing sector activity. The country’s steel and aluminium production was heavily dented by difficulties in state-owned steel mill Zeljezara Niksic and Montenegro’s sole aluminium smelter KAP. Podgorica’s commercial court recently launched proceedings for opening bankruptcy at KAP.

A possible closure of the aluminium smelter will heavily affect Montenegro’s industrial output and exports as well as their respective contributions the GDP. On the other hand, steel production might benefit from investments in Zeljezara Niksic by Turkey's Toscelik. The Turkish company acquired the troubled steel mill for EUR 15.1mn in May 2012.