MB RESEARCH: The outlook for steel in East Asia

MBR estimates that, in 2020, finished steel consumption in East Asia and Southeast Asia (excluding China) will exceed 250 million tonnes.

MBR estimates that, in 2020, finished steel consumption in Southeast Asia (excluding China) will exceed 250 million tonnes.

Southeast Asia’s finished steel consumption recovered rapidly after the 2009 global downturn, and expanded at an average annual rate of 0.8% between 2008 and 2013. Steel consumption by this major emerging market was propelled by an influx of direct foreign investment, fuelled by cheap borrowing in the USA and Japan, and the region’s growth rates exceeded those of Asia Pacific’s mature economies.

Southeast Asia’s growth in consumption of flat products exceeded that of long finished steel, suggesting it was experiencing changes in structural demand as the industrial production base strengthened in this emerging market.

Whereas steel consumption in Asia Pacific’s mature economies is forecasted to grow at an average of just 1% per year between 2014 and 2020, Southeast Asia’s demand for finished steel is forecasted to see compound growth of 2.5% between 2014 and 2020.

South Korea is expected to see the strongest growth in steel demand among the wider region’s developed nations, thanks to the rising take-up from the expanding shipbuilding and automotive sectors.

The region’s emerging economies are expected to show robust expansion, via urbanisation and infrastructure expansion as well as by the gradual shift towards an investment-driven economic model.

This will propel steel demand in the region’s emerging economies to a compounded annual growth rate of 5.5% between 2014 and 2020. 

Construction is the largest steel end-using sector, accounting for about 75% of the take-up of long products and some 18% of the consumption of flat steel products.

Ongoing urbanisation and the expansion of the industrial production base in the region’s emerging markets will, by 2020, see the construction sector’s uptake of flat steel products to more than 20% of their uptake.

The Southeast Asian steel markets are short on domestic steel supply despite the region’s own established steel industries and considerable potential growth in demand.

Over the past few years, most of the demand has been served by imports of material from China and the region’s other mature steel producing countries.

Southeast Asian mills have suffered from unsustainably high operating costs and a reliance on EAF steelmaking, which has imposed raw material limitations on steelmakers.

This situation will change as a new large-scale BOF operation is being set up in Indonesia by Krakatau, and new capacity is also being planned in the region’s other countries.

Improvements in regional supply will come through as steelmakers from the mature markets of Japan, South Korea and Taiwan bid to introduce new business practices by establishing a foothold in the emerging markets to challenge Chinese dominance over Southeast Asian steel supply.

If it is achieved, such a shift of the production base to the end-markets will not only speed up the service to local buyers, but will also allow the regional mills to secure a market presence amid the intensifying protectionism seen in Southeast Asia in response to the surging supply of cheap steel products from China.

Although prone to chronic overcapacity and seeing deteriorating margins on the looming indebtedness of the steel sector, China has dominated finished steel trade in the region.

Southeast Asian destinations account for 40% of the region’s total shipments of steel exports.
By way of comparison, intra-ASEAN finished steel trade stood at just above 5% in 2013.

China’s export share has been further supported by extensive exports of the boron-containing carbon steel commoditised products, designed to circumvent Chinese export duties, imposed since 2010. The introduction of a favourable higher-added-value flat steel products tax framework has dramatically altered China’s finished steel export structure, with CRC, HDG and colour-coated steel dominating export volumes.

Methodology and coverage
A new Metal Bulletin Research strategic forecast study – Southeast Asian Steel and Raw Materials Industry has just been published.

Its production is the result of six months of meticulous research involving face-to-face or phone interviews with more than 150 industry participants.

The study offers exclusive data on the region’s emerging markets that steel associations under-report, insights and perspectives into China and how this will affect Southeast Asian steel prices, the most accurate and independent assessment of current and future supply and demand and market prices by steel product out to 2020 for each Southeast Asian market, geo-political analysis of each market, SWOT and market share analysis of all the key producers’ strategic plans and the future supply-side picture out to 2020.

For the first time, the study provides a detailed breakdown of steel consuming sectors for each market, including construction, shipbuilding by type and automotive forecasts by vehicle type out to 2020.

Who is the report for?
Southeast Asian Steel and Raw Materials Industry should be required reading for all semi and finished steel and raw material producers and traders alike, as well as governmental bodies.

The study covers about 95% of the Southeast Asian steel sector.

The report’s analysis is based on trend discovery and includes forecasts out to 2020, concerning finished steel products shipments, trade and consumption on regional as well as a country-by-country basis.

Roman Kucinskij, a consultant with Metal Bulletin Research, is one of the authors of the report.

For a copy of the Southeast Asian Steel and Raw Materials Industry, please call +44 (0)20 7779 8000 or contact Brian Levich, consultancy and special projects director, blevich@metalbulletinresearch.com, or call +44 (0)20 7556 6020.

To download a free sample of the report, click here.