2017 ASEAN Iron and Steel Sustainability Forum Update on ASEAN Steel Industry Development Scenario Presented by: TAN AH YONG Secretary General South East Asia Iron and Steel Institute (SEAISI)
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
Economic Indicators IMF revised up the projection of economic growth for many countries and regions in its October World Economic Outlook. Global growth in 2017 was revised up from 3.4% in April 2017 to 3.68% in October 2017. It is expected that global economy will improve slightly to 3.7% in 2018 and 2019. China s growth is projected to register 6.8% in 2017 and will slow down to 6.5% in 2018 and 6.3% in 2019. Growth projection for India for 2017 has been revised down to 6.7%, from 7.2% in April, but is expected to pick up to 7.4% in 2018. For ASEAN-5, IMF has predicted a stronger growth rate of 5.2% in 2017, as against the earlier projection of 5.0%. Growth projection for 2018 is maintained at 5.2%. 3 Source : IMF World Economic Outlook updated October 2016
Economic Indicators Philippines Vietnam Malaysia Indonesia Thailand Q3 2017 GDP growth (%y-o-y) Singapore Source : Trading Economics, SEAISI 4
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
ASEAN-6 steel consumption slowed down in the first half of 2017 but is expected to pick up in the second half of the year. Apparent Steel Consumption in ASEAN (million tonnes) Unit: tonnes H1 2016 % Growth Production 16,274,340 16,182,219-0.6% Import 26,119,282 24,570,339-5.9% Export 4,035,511 4,744,766 17.6% Consumption 38,358,112 36,007,792-6.1% Notes: Production: Hot rolled steel products Import & Export: Hot rolled + Cold rolled + Coated sheets & strips + Pipes & Tues 6
Decline in steel demand in ASEAN-6 in the first half of 2017 mainly due to drop in consumption in Thailand and Vietnam Apparent Steel Consumption Unit: tonnes Three countries in ASEAN-6 experienced significant declines in steel demand in the first half of 2017 with Thailand registering the highest negative growth rate of 15.9% y-o-y, followed by Vietnam (-10.9%) and Malaysia (-7.7%). The reasons include destocking activities, slower economic growth and slow uptake in public investment projects. Both Indonesia and Philippines continued to enjoy positive growth rates and are expected to maintain the momentum into the second half of 2017. Singapore s steel demand started to pick up after two consecutive years of decline. Steel consumption in Thailand and Vietnam expected to pick up in the second half of 2017. The Vietnam Steel Association (VSA), in particular, is confident that Vietnam s steel demand will recover and that it will achieve around 5% growth rate for the whole of the year. 7
ASEAN s flat steel output in picked up by 7.8% y-o-y while long steel production declined slightly, by 2.8% y-o-y. Production H1 2015 H1 2016 % growth % growth Unit: tonnes 16/15 17/16 Long Products 10,455,975 12,847,864 12,487,766 22.9% -2.8% Flat Products 3,153,694 3,426,476 3,694,453 8.6% 7.8% Total 13,609,669 16,274,340 16,182,219 19.6% -0.6% Remarks: Flat products production consists of hot rolled flat products only 8
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
INDONESIA Unit: million tonnes H1 2016 Demand up 3.8% y-o-y Domestic output increased significantly, by 11.8% y-o-y Production of both long steel and hot rolled flat steel increased by a double digit of 12% y-o-y. Long steel Import declined 22% while import of flat steel increased 6% y-o-y. Overall, import dropped 1.7% y-o-y. (Hot rolled only) H1 2016 % Growth Production 3,568,892 3,990,955 11.8% Import 3,339,425 3,281,130-1.7% Export 368,113 485,646 31.9% Consumption 6,540,205 6,786,438 3.8% Export of both long and flat steel surged significantly, by 15% y-o-y and 37% y-o-y, respectively. 10
Indonesia s flat steel demand continued to expand H1 2016 Unit: million tonnes Indonesia s long steel demand slowed down slightly, by 1.3% y-oy. Production increased by a double digit of 12% y-o-y. (Hot rolled only) Import dropped sharply, by 22% y- o-y while export surged significantly, by 15% y-o-y. H1 2016 Indonesia s demand for flat steel increased 7% y-o-y. Domestic production registered a double digit growth of 12% y-o-y. Import surged moderately, by 6% y- o-y and export increased significantly, by 37% y-o-y (Hot rolled only) 11
MALAYSIA Unit: million tonnes H1 2016 Steel demand in the first half of 2017 declined 7.7% y-o-y. Production and import dropped moderately, by 3.9% y-o-y and 1.1% y-o-y, respectively. Export, on the other hand, surged 50.7% in the first half of 2017. (Hot rolled only) H1 2016 % Growth Production 1,863,322 1,790,000-3.9% Import 3,583,672 3,544,021-1.1% Export 524,745 790,860 50.7% Consumption 4,922,249 4,543,161-7.7% 12
Malaysia s steel demand dropped in the first half of 2017, mainly due to the slowdown in long steel demand Unit: million tonnes H1 2016 Malaysia s long demand dropped significantly, by 12% y-o-y. Domestic production was relatively unchanged, declining marginally by 1% y- o-y Import dropped significantly, by 30% y-o-y Export volume was small, and declined by nearly half in volume. (Hot rolled only) H1 2016 Demand for flat steel declined marginally by 1% y-o-y.. Domestic production dropped sharply, by 34% y-o-y. Import rose significantly, by 16% y-o-y, while export doubled in volume. (Hot rolled only) 13
PHILIPPINES Unit: million tonnes H1 2016 Steel demand in the Philippines continued to expand, by 9.8% y-o-y, in the first half of 2017 (Hot rolled only) Negligible H1 2016 % Growth Production 2,150,000 2,000,000-7.0% Import 2,127,287 2,698,288 26.8% Export 0 0 - Consumption 4,277,287 4,698,288 9.8% Long steel demand registered a double digit growth rate and flat steel demand continued to increase moderately. Domestic production, however, reduced 7% y-o-y, but import increased sharply, by 26.8% y-o-y in the first half of 2017. 14
Philippines flat steel demand grew significantly while long steel demand slowed down H1 2016 Philippines long steel demand declined 6% y-o-y Both domestic production and import declined moderately, by 7% y-o-y and 3% y-o-y, respectively. Unit: million tonnes (Hot rolled only) H1 2016 Flat steel demand, on other hand, increased significantly, by 57% y-oy. The major import items were hot rolled sheet and coated sheet (Hot rolled only) 15
SINGAPORE Unit: million tonnes H1 2016 Singapore s steel demand picked up in the first half of 2017, by 14.2% y-o-y. Domestic production enjoyed a positive growth rate of 9.1% y- o-y. Import decreased 9.4% y-o-y and export dropped sharply, by 36.1% y-o-y. (Hot rolled only) H1 2016 % Growth Production 247,461 269,905 9.1% Import 2,029,506 1,838,193-9.4% Export 979,930 626,343-36.1% Consumption 1,297,037 1,481,754 14.2% 16
Singapore s long steel demand picked up significantly, but not flat steel demand H1 2016 Unit: million tonnes Singapore s long steel demand almost doubled in volume to above a million tonnes in the first half of 2017 Domestic output increased 9% y- o-y Import volume was maintained at 1.2 million tonnes Export reduced by half in volume H1 2016 Flat steel demand, on the other hand, declined significantly, by 35% y-o-y Import dropped 24% and export retreated 4.5% y-o-y 17
THAILAND Unit: million tonnes (Hot rolled only) H1 2016 Thailand s steel demand in the first half of 2017 declined significantly, by 15.9% y-o-y This was mainly due to destocking activities following a huge pile up in inventory in 2016 Domestic production shrank 18.3% y-o-y Import reduced 10.6% y-o-y. Export rose 25.5% y-o-y. H1 2016 % Growth Production 4,255,618 3,477,359-18.3% Import 6,209,644 5,549,659-10.6% Export 537,928 675,284 25.5% Consumption 9,927,334 8,351,734-15.9% 18
Long steel demand shrank significantly in the first half of 2016 H1 2016 Unit: million tonnes Thailand s long steel demand in H1 2017 dropped by 32% y-o-y Both domestic supply and import declined significantly, by nearly 30% y-o-y Export surged 9% y-o-y (Hot rolled only) H1 2016 Flat steel demand slowed down moderately, by 4% y-o-y Production volume for hot rolled flat steel surged 7% y-o-y Import dropped moderately, by 5% y- o-y (Hot rolled only) Export was not significant but the volume increased 49% y-o-y 19
VIETNAM Unit: million tonnes H1 2016 Vietnam s steel demand, for the first time, suffered a decline of 10.9% y-o-y, after 5 consecutive years of significant increase The decline in steel demand was mainly due to the sharp drop in flat steel consumption Domestic production, however, surged 11.1% y-o-y Import declined 13.3% y-o-y. (Hot rolled only) H1 2016 % Growth Production 4,189,047 4,654,000 11.1% Import 8,829,749 7,659,048-13.3% Export 1,624,796 2,166,632 33.3% Consumption 11,394,000 10,146,416-10.9% Export increased significantly, by 33.3% y-o-y, mainly from the export of flat steel. 20
Vietnam s long and flat steel demand both slowed down H1 2016 Unit: million tonnes Vietnam s long steel market dipped slightly, by 3% y-o-y Domestic production continued to increase, at 11% y-o-y Import declined 28% y-o-y (Hot rolled only) Export doubled in volume in the first half of 2017 H1 2015 H1 2016 Demand for flat steel dropped significantly, by 18% y-o-y Import reduced 10% y-o-y but export rose significantly, by 28% y- o-y (Hot rolled only) 21
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
ASEAN: still a major import region for steel products Unit: million tonnes 2009 2013 2014 2015 2016 H1 2016 Total Import 33.0 54.6 57.2 61.4 69.4 34.5 30.5 - Semi-finished Steel 9.6 9.7 10.8 12.7 15.7 8.4 5.9 - Section, bar & wire rods 4.7 11.2 12.4 13.8 13.3 6.0 4.7 - Hot-rolled sheets & strips 9.6 17.8 18.4 19.2 22.7 10.5 9.5 - Cold-rolled products 3.7 5.1 4.9 5.0 5.6 1.8 2.5 - Coated sheets & strips 3.0 6.6 6.6 7.4 8.5 3.1 3.1 - Others 2.4 4.2 4.0 3.3 3.5 4.8 4.9 Breakdown by country - Thailand 8.9 15.6 14.7 14.4 17.2 9.1 7.3 - Vietnam 8.5 9.2 11.7 15.8 18.7 9.8 7.9 - Indonesia 5.5 12.0 12.3 11.0 12.3 6.3 5.4 - Malaysia 3.7 6.4 7.2 7.4 8.6 3.6 3.9 - Singapore 3.7 6.0 5.2 5.1 4.1 2.0 1.8 - Philippines 2.8 5.4 6.1 7.7 8.6 3.7 4.2 Main sources of import 2009 2013 2014 2015 2016 H1 2016 - Japan 23% 25% 23% 20% 19% 18% 20% - China 13% 30% 42% 52% 53% 53% 39% - South Korea 11% 13% 12% 10% 8% 9% 10% - Russia 13% 6% 4% 2% 3% 4% 3% - Taiwan 10% 7% 7% 6% 6% 6% 6% - India 2% 3% 1% 2% 2% 1% 5% - Intra-ASEAN 10% 5% 5% 5% 5% 4% 6% Total import reduced 11.6% y-o-y in the first half of 2017 23
Long steel import Major sources of Section import in ASEAN Unit: tonnes 1.07 mt Major sources of Bar import in ASEAN 1.57 mt 24
Long steel import Major sources of Wire rod import in ASEAN Unit: tonnes 2.03 mt 25
Flat steel import Major sources of HRP import in ASEAN Unit: tonnes 2.13 mt Major sources of HRC import in ASEAN 4.0 mt 26
Flat steel import Major sources of CRC import in ASEAN Unit: tonnes 2.5 mt Major sources of Coated sheet import in ASEAN 3.1 mt 27
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
Significant Developments Formosa Ha Tinh Steel Corporation finally was able to successfully blow-in its blast furnace in Ha Tinh Province, Vietnam in June 2017 and is now targeting to double its steel production capacity from the current 3.5 million tonnes per year to 7 million tonnes per year by March 2018. Hoa Phat Group, one of the largest domestically owned steel companies in Vietnam, is on track to implement its 4 million tonnes/year integrated steel works in central Vietnam s Quang Ngai province which it hopes to start commercial operations in 2019. It has already placed orders for three continuous casters and two rolling mills. 29
Significant Developments (cont) PT Krakatau Steel s joint venture companies, PT Krakatau Osaka Steel (bars and sections) and PT Krakatau Nippon Steel Sumikin (galvanized/annealed cold rolled coil for the automotive sector) both officially started commercial production in July this year, with production capacity of 500,00 tonnes/year each. PT Krakatau Steel plans to commission its new 1.2 million tonnes/year blast furnace in Cilegon, Indonesia in December this year. 30
Significant Developments (cont) China s steel export to ASEAN-6 dropped significantly in the first nine months of 2017, falling 42% year-on-year to 16.35 million tonnes. In the same period, China s steel export to the world declined 30% year-on-year to 59.61 million tonnes. Among the steel products exported from China to ASEAN-6, bar and wire rod saw the biggest drop in export volume, plunging 79% and 41% year-on-year respectively in the first nine months of 2017. Major items of steel export from China to ASEAN-6: 2014 2015 2016 Jan-Sept '16 Jan-Sept 17 y-o-y % Bar 6,726,501 11,943,076 13,316,419 10,741,650 2,533,831-79% Wire rod 4,405,881 5,127,348 4,968,249 3,811,705 2,259,916-41% Hot rolled coil 3,721,565 4,218,324 5,484,716 4,025,327 3,691,062-8% Coated steel 2,983,051 3,536,183 4,853,742 3,729,110 3,088,809-17% Plates 1,716,406 2,250,553 2,512,102 2,140,470 1,500,021-30% Pipes & tubes 1,544,396 1,587,544 1,572,475 1,240,469 993,096-20% Section 1,326,670 1,406,201 1,740,189 1,298,083 703,931-46% 31
Significant Developments (cont) India is beginning to emerge as a notable steel exporter to ASEAN. Its share of ASEAN-6 imports increased from a mere 1% in the first half of 2016 to 5% in the same period of 2017. India s main export items to ASEAN-6 in the first six months of 2017 were HRC (12% of total) and CRC (6% of total) 32
CONTENTS: Macroeconomic Scenario Steel Consumption and Production Steel Situation in Individual ASEAN Countries Analysis of Steel Imports Significant Developments Conclusions
Conclusions After registering a strong year-on-year growth of 11.4% in 2016, steel demand in ASEAN-6 surprisingly retreated in the first half of 2017, with total apparent consumption in the six countries dropping 6.1% year-on-year to 36 million tonnes in the six-month period. The decline in steel demand in ASEAN- 6 was mainly attributable to the slowing down of consumption in the two biggest steel consuming countries in the region i.e. Vietnam and Thailand. 34
Conclusions (cont) Vietnam s steel consumption suffered a 10.9% year-on-year drop, from 11.39 million tonnes in the first half of 2016 to 10.15 million tonnes in the corresponding period of 2017. The weakening of steel demand in Vietnam in the first six months of 2017 was mainly due to the slower than expected GDP growth rate (5.73% in the first half of 2017 against the official targeted annual growth rate of 6.7%), the slow uptake in public investment projects and the tightening of supply of construction sand and rising prices which affected construction activities in the country. However, the Vietnam Steel Association expects steel consumption in the second half of the year to pick up and that steel demand in Vietnam for the whole of 2017 will still be able to register a healthy positive year-on-year growth rate. 35
Conclusions (cont) Thailand s apparent steel demand declined even more, falling 15.9% year-onyear, from 9.93 million tonnes in the first six months of 2016 to 8.35 million tonnes in the corresponding period of 2017. The sharp drop in Thailand s steel consumption was mainly attributable to destocking activities following the aggressive accumulation of stocks by stockists in 2016 in response to rising steel prices, resulting in a strong year-on-year surge of 15.1% in Thailand s apparent steel demand for that year. For the second half of 2017, the situation is expected to return to normal and that apparent steel demand will start to pick up. However, for the year as a whole, Thailand is expected to see moderate decline in its annual steel consumption. 36
Conclusions (cont) ASEAN Apparent Steel Consumption (million tonnes) With the recovery of steel demand growth in Vietnam and Thailand in the second half of the year and the expected expansion of steel consumption in Indonesia and Philippines, ASEAN-6 will still be able to register a positive growth rate in steel consumption for the whole 2017. 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017F 37