Performance of the ASEAN Iron and Steel Industry in 2017 and Outlook Presented by: Tan Ah Yong Secretary General South East Asia Iron and Steel Institute (SEAISI) 1
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 2
Economic Indicators Global growth strengthened in 2017 to 3.76%, and is projected to firm up to 3.94% in 2018. Advanced economies GDP grew at 2.34% in 2017 and will pick up slightly to 2.48% in 2018. China s economic growth reached 6.86% in 2017 but is expected to slow down to 6.56% in 2018. India s economic growth softened to 6.7% in 2017 but is projected to pick up to 7.4% in 2018. ASEAN-5 s GDP growth in 2017 was higher, at 5.34%, and is expected to sustain at the same rate in 2018. Source : IMF World Economic Outlook updated April 2018 3
Economic Indicators Vietnam Malaysia Indonesia Thailand Philippines Q1, 2018 GDP growth (%y-o-y) Singapore Source : Trading Economics and various sources 4
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 5
Apparent Steel Consumption in ASEAN-6 (tonnes) 2016 2017 % change 16/17 Indonesia 12,673,109 13,592,784 7.3% Philippines 9,677,422 9,819,229 1.5% Singapore 2,831,881 2,786,999-1.6% Vietnam 22,328,000 21,637,000-3.1% Malaysia 10,255,764 9,442,620-7.9% Thailand 19,212,310 16,495,278-14.1% ASEAN 76,978,486 73,773,910-4.2% ASEAN s apparent steel consumption in 2017 declined 4.2% y-o-y to 73.8 million tonnes Indonesia and Philippines are the only two countries that registered positive growth rates, due to continued expansion in construction sector, at 7.3% y-o-y and 1.5% y-o-y, respectively. Thailand registered the sharpest decline within the region, at -14.1% y-o-y. This was mainly due to slowdown in construction sector as well as destocking from the huge inventory pile-up in 2016. The declines of steel demand in Malaysia, Vietnam and Singapore were mainly due to the slowdown in construction activities. Source : SEAISI 6
ASEAN-6 steel consumption still mainly served by imports, despite the drop in total import volume in 2017 Unit: tonnes 2016 2017 Growth (%) Production* 31,872,983 34,711,636 8.9% Import 53,691,346 49,180,969-8.4% Export 8,585,844 10,118,695 17.9% Consumption 76,978,486 73,773,910-4.2% * Hot rolled production only Source : SEAISI 7
Overall steel production in ASEAN-6 surged in 2017 Unit: tonnes 2016 2017 ASEAN-6 31,872,983 34,711,636 Indonesia 6,582,234 7,866,362 Malaysia 3,781,668 3,772,057 Philippines 4,346,038 4,300,249 Singapore 528,453 595,522 Thailand 7,977,590 6,875,446 Vietnam 8,657,000 11,302,000 Overall steel production in ASEAN-6 increased significantly, by 9% y-o-y in 2017. Indonesia and Vietnam registered double digit growth rates in finished steel production, at 19.5% and 30.5% y-o-y respectively. Thailand s steel production declined significantly, by 13.8% y-o-y, while Malaysia and Philippines steel output experienced marginal declines. Steel production in Singapore continued to increase, but the volume has yet to reach 2011 levels. Source : SEAISI 8
Overall finished steel import in ASEAN-6 declined by 8.4% y-o-y in 2017 Indonesia s finished steel import increased slightly moderate increase in flat steel import but import of long steel declined. Malaysia s long steel import declined significantly due to the slowdown in construction sector, but import of flat steel rose due to closure of domestic producer of HRC. Philippines import for both flat and long steel increased moderately. Singapore and Thailand s import of both flat and long steel dropped significantly. Vietnam s import of both flat and long steel suffered double digit drop. Source : Customs from various countries 9
Finished steel export in most of the countries in ASEAN-6 registered double-digit increases in 2017 Indonesia s finished steel export rose by 70% y-o-y to reach 1.35 million tonnes in 2017, mainly contributed by export of flat products. Malaysia s steel export increased 32% y-o-y to 1.4 million tonnes. Thailand s finished steel export increased by more than 20% y-o-y to 1.3 million tonnes. Vietnam s steel export increased 24% y-o-y to 4.7 million tonnes, mainly construction steel, both flat and long. Vietnam is the single largest steel exporting country in ASEAN. Source : Customs from various countries 10
Going forward ASEAN s steel consumption growth will be propelled by growing construction sector Indonesia s construction industry is expected to grow by an average rate of 6.9% per year between 2017 and 2021. Malaysia s construction projects worth RM350bln are expected to come onstream over the next two to three years. Philippine government s Build-Build-Build Programme will launch many infrastructure projects. Vietnam s steel demand will soon pick up due to the government s continued investment in infrastructure projects. Thailand s steel demand will recover due to the government s mega projects, especially the Eastern Economic Corridor Development Project (EEC). Source : SEAISI 11
ASEAN-6 s steel consumption is expected to return to growth trajectory in 2018 and is projected to grow at 5-6% y-o-y in the near term Apparent Steel Consumption in ASEAN (million tonnes) Surge in ASC in 2016 was partly contributed by inventory pile-up the demand is expected to pick up in 2018 and surpass 80mt in 2019 Source : SEAISI 12
ASEAN steel consumption per capita Unit: kg Steel consumption per capita 2015 2016 2017 2018F 2019F Indonesia 45 49 52 55 58 Malaysia 321 324 293 294 295 Philippines 86 93 92 96 100 Singapore 725 505 491 486 486 Thailand 242 279 239 266 283 Vietnam 199 241 231 238 247 ASEAN 125 137 130 136 142 F = Forecast CAGR 1998-2017 5.8% Source : SEAISI 13
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 14
Indonesia: Steel consumption continued to expand in 2017 tonnes Indonesia 2016 2017 % growth '17-16 Source : SEAISI Production* - Crude Steel 4,745,908 4,745,908 0.0% - Finished Steel 6,582,234 7,866,362 19.5% Import 6,882,034 7,074,590 2.8% Export 791,159 1,348,169 70.4% Consumption 12,673,109 13,592,784 7.3% * Production of hot rolled products only CAGR 11-17 3.7% 15
Malaysia: Steel consumption dropped moderately in 2017 tonnes Malaysia 2016 2017 % growth '17-16 Production* - Crude Steel 2,764,078 3,214,940 16.3% - Finished Steel 3,781,668 3,772,057-0.3% Import 7,537,565 7,075,926-6.1% Export 1,063,469 1,405,363 32.1% Consumption 10,255,764 9,442,620-7.9% CAGR 11-17 2.3% Source : SEAISI * Production of hot rolled products only 16
Philippines: Steel consumption growth momentum slowed down in 2018 Philippines 2016 2017 % growth '17-16 tonnes Source : SEAISI Production* - Crude Steel 1,075,182 1,377,587 28.1% - Finished Steel 4,346,038 4,300,249-1.1% Import 5,431,384 5,618,980 3.5% Export 100,000 100,000 0.0% Consumption 9,677,422 9,819,229 1.5% * Production of hot rolled products only CAGR 11-17 11.5% 17
Singapore: Steel consumption dipped marginally in 2017 tonnes Singapore 2016 2017 % growth '17-16 Production* - Crude Steel 520,147 593,015 14.0% - Finished Steel 528,453 595,522 12.7% Import 4,072,987 3,449,178-15.3% Export 1,769,559 1,257,701-28.9% Consumption 2,831,881 2,786,999-1.6% CAGR 11-17 -5.2% Source : SEAISI * Production of hot rolled products only 18
Thailand: Steel demand in 2017 dropped significantly partly due to destocking activities tonnes Thailand 2016 2017 % growth '17-16 Source : SEAISI Production* - Crude Steel 3,825,120 4,471,361 16.9% - Finished Steel 7,977,590 6,875,446-13.8% Import 12,316,376 10,940,294-11.2% Export 1,081,656 1,320,462 22.1% Consumption 19,212,310 16,495,278-14.1% * Production of hot rolled products only CAGR 11-17 2.1% 19
Vietnam: Steel consumption dropped 3% y-o-y in 2017, but domestic production surged strongly Vietnam 2016 2017 % growth '17-16 tonnes Production* - Crude Steel 7,811,000 11,473,000 46.9% - Finished Steel 8,657,000 11,302,000 30.6% Import 17,451,000 15,022,000-13.9% Export 3,780,000 4,687,000 24.0% Consumption 22,328,000 21,637,000-3.1% CAGR 11-17 14.9% Source : SEAISI * Production of hot rolled products only 20
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 21
Finished Steel: Demand & Supply Share of steel consumption 100% Steel consumption (million tonnes) Source : SEAISI 22
Finished Steel: Demand & Supply Unit: million tonnes Long steel 2016 2017 % Growth Production* 25,348,562 25,927,506 2.3% Import 15,049,193 12,208,448-18.9% Export 3,133,829 3,104,704-0.9% Consumption 37,263,926 35,031,250-6.0% Flat steel 2016 2017 % Growth Production* 6,524,421 8,784,130 34.6% Import 38,642,153 36,972,521-4.3% Export 5,452,015 7,013,991 28.6% Consumption 39,714,559 38,742,660-2.4% * Hot rolled production only Source : SEAISI 23
ASEAN-6: China is still the predominant source of steel imports, but share of total import dropped from 53% in 2016 to 43% in 2017 Million tonnes (otherwise stated) 2009 2013 2014 2015 2016 2017 Total Import 33.0 54.6 57.2 61.4 69.4 59.8 - Semi-finished Steel 9.6 9.7 10.8 12.7 15.7 10.6 - Section, bar & wire rods 4.7 11.2 12.4 13.8 13.3 10.4 - Hot-rolled sheets & strips 9.6 17.8 18.4 19.2 22.7 21.1 - Cold-rolled products 3.7 5.1 4.9 5.0 5.6 6.4 - Coated sheets & strips 3.0 6.6 6.6 7.4 8.5 7.6 - Others 2.4 4.2 4.0 3.3 3.5 3.6 Breakdown by country - Thailand 8.9 15.6 14.7 14.4 17.2 13.9 - Vietnam 8.5 9.2 11.7 15.8 18.7 15.3 - Indonesia 5.5 12.0 12.3 11.0 12.3 11.2 - Malaysia 3.7 6.4 7.2 7.4 8.6 7.6 - Singapore 3.7 6.0 5.2 5.1 4.1 3.5 - Philippines 2.8 5.4 6.1 7.7 8.6 8.4 Main sources of import 2009 2013 2014 2015 2016 2017 - Japan 23% 25% 23% 20% 19% 23% - China 13% 30% 42% 52% 53% 43% - South Korea 11% 13% 12% 10% 8% 11% - Russia 13% 6% 4% 2% 3% 1% - Taiwan 10% 7% 7% 6% 6% 7% - India 2% 3% 1% 2% 2% 5% - Intra-ASEAN 10% 5% 5% 5% 5% 6% Source : SEAISI 24
Steel exported from China to ASEAN shifting more towards flat steel China s finished steel export to ASEAN in 2016 China s finished steel export to ASEAN in 2017 Flat Included square bar Flat Included square bar Long Long Source: China s customs 25
Long steel import Major sources of Section import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 2.97 mt 2.51 mt Major sources of Bar import in ASEAN 4.01 mt 2016 2017 3.23 mt 2016 2017 Source : SEAISI s estimation 26
Long steel import Major sources of Wire rod import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 6.34 mt 4.68 mt Source : SEAISI s estimation 27
Flat steel import Major sources of HRP import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 4.51 mt 3.84 mt Major sources of HRC import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 18.2 mt 17.26 mt Source : SEAISI s estimation 28
Flat steel import Major sources of CRC import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 5.64 mt 6.5 mt Major sources of Coated sheet import in ASEAN Major importers in ASEAN-6 2016 2017 2016 2017 8.49 mt 7.6 mt Source : SEAISI s estimation 29
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 30
Significant Developments In Vietnam, Formosa Ha Tinh Steel Corporation has become the biggest integrated steel producer in ASEAN after it successfully fired its second 4,350 cu m blast furnace in May 2018, bringing its total annual production capacity to 7 million tonnes. 31
Significant Developments In Malaysia, Alliance Steel (M) Sdn Bhd, a Chinese joint-venture project owned by Guangxi Beibu Gulf Port International Group and Guangxi Shenlong Metallurgical Co. Ltd, ignited its 1,080 cu m blast furnace at its plant at Kuantan, Pahang in Peninsular Malaysia in March 2018. It plans to commission another similar-sized blast furnace in the future, which will bring its total production capacity to 3.5 million tonnes per annum. The company s products will include high carbon wire rod, bar and H-beams. 32
Significant Developments (cont) Indonesia has surfaced as an important base for offshore investment by China and the world s biggest stainless steel producer, Tsingshan Iron & Steel Group. The company has invested heavily in Morowali, Central Sulawesi to produce nickel pig iron (capacity 1.5 million tonnes per year) and stainless steel (capacity 3 million tonnes per year). 33
Significant Developments (cont) China s finished steel export to the world dropped significantly in 2017, dipping by 30.5% year-on-year to 75.43 million tonnes. In the same period, its export volume to ASEAN-6 fell even more, by 42% year-onyear to 20.93 million tonnes. In the first quarter of 2018, the export volume to ASEAN-6 was 4.45 million tonnes, down 29% year-on-year. 34
Significant Developments (cont) Vietnam has become the first country in the region, and perhaps the world, to be slapped anti-circumvention duties by the US government on its export of cold-rolled steel (CRC) and corrosion-resistant steel (CORE) produced from substrate originating in China. On 23 May 2018, US Department of Commerce announced its final determination to impose countervailing duties (CVD) of 256.44% and anti-dumping (AD) duties of 199.76% on Vietnamese CRC and AD duties of 199.43% and CVDs of 39.05% on CORE. 35
Significant Developments (cont) The US government s decision to impose a blanket 25% duty on steel imports under Section 232 of its Trade Expansion Act of 1962 in March 2018 has caused much uncertainty in the global steel market amidst threats of retaliatory trade wars. The ASEAN countries, with the possible exception of Vietnam, are not significant exporters of steel products to the US and are thus not adversely impacted by the action directly. However, the indirect impacts of redirection of exports to the region and the possible increase in the prices of ferrous scrap are cause for concern to the steelmakers in the region. 36
CONTENTS: Macroeconomic Scenario Steel Production and Consumption - ASEAN - By country Demand and Supply Significant Developments Conclusions 37
Conclusions Following a strong 11.4% year-on-year growth in 2016, ASEAN-6 s apparent steel consumption dipped by 4.2% in 2017. The drop in steel consumption was mainly attributable to the slow down in the construction sector in Malaysia, Thailand and Vietnam. Additionally, steel consumption was also affected by the destocking activities following the huge inventory pile up in 2016, especially in Thailand. Regional steel production in 2017 surged while exports also increased. Imports, on the other hand, has slowed down but volume still substantial, at 60 million tonnes, including semis. Source : SEAISI 38
Conclusions Indonesia and Philippines are expected to continue to maintain their steel consumption growth momentum largely contributed by the implementation of infrastructure projects by the governments of the two countries. Vietnam s steel demand is expected to pick up again in 2018, also on account of spending by the government on infrastructure and social development projects. ASEAN-6 s steel consumption is expected to recover in 2018, growing at 5-6% year-onyear. Total steel consumption in ASEAN-6 is projected to surpass 80 million tonnes in 2019. Source : SEAISI 39
Conclusions Steelmaking capacity in the region is set to increase with the implementation of a number of new steel projects over the course of the next few years. For example, in Vietnam, Formosa Ha Tinh Steel Corporation and Hoa Phat Group are on an expansion path while in Malaysia, the Chinese-owned steel project, Alliance Steel, is on track to complete its initial phase of 2.6 million tonnes of steel semis capacity. In Indonesia, the state-owned PT Krakatau Steel has also ambitious plan to become a 10 million tonnes steel producer. Opportunity ahead for the steelmakers in ASEAN to increase regional steel trade, which at the moment accounted for only 6% of total steel trade, through collaboration and specialisation. Source : SEAISI 40
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