Southeast Asian steel market status and demand outlook

Southeast Asian steel market status and demand outlook

Southeast Asia market is China's important steel export destination

The Southeast Asian market is an important steel export destination in China. The economic development in the region continues to improve, the infrastructure construction in various countries is relatively imperfect, and the demand for steel is huge. From January to September 2017, China’s total steel exports amounted to 59.46 million tons. Among the top ten exporting countries, Southeast Asian countries accounted for five, with an export volume of 15.31 million tons, accounting for 25.7% of total exports. Among the top 20 countries, Southeast Asian countries accounted for 7 of them, with an export volume of 17.73 million tons, accounting for 29.8% of total exports. This shows that Southeast Asian countries have a pivotal position in China's steel export destinations.

Southeast Asian market situation

◆ There are certain differences in the development of Southeast Asian countries.

The Singapore economy is dominated by services, finance, technology, shipping, logistics, and tourism. The standard of living has reached the standards of developed countries. The Malaysian and Thai economies are dominated by industry, manufacturing, tourism and agriculture. Actively developing the shipping industry and the logistics industry, the economic development has a certain foundation; Vietnam, the Philippines and Indonesia are heavily biased towards tourism, basic manufacturing, agriculture and fisheries, and the development is relatively backward.

◆The ironmaking capacity of ASEAN countries is generally insufficient

Indonesia and Malaysia are the only two countries that can produce direct reduced iron/hot pressed iron and are basically electric steelmaking. The imbalance of the steel industry chain structure in Southeast Asia is more serious. The steel rolling capacity is far greater than the steelmaking capacity. The steelmaking capacity is far greater than the ironmaking capacity, and it is impossible to produce high-end products. Steel production is concentrated in Malaysia, Vietnam, Thailand and Indonesia, and Malaysia is the only country with excess billet production.

◆ Unbalanced raw material supply

Southeast Asian countries lack iron ore and scrap resources. The raw materials needed for the steel industry are almost imported from other regions. Enterprises must pay expensive freight for imported raw materials, which increases the cost of steel production.

◆The steel industry in each country is mainly based on construction

From the perspective of the major steel industries in Southeast Asian countries, the construction industry is the mainstay, with more than 60%, and Vietnam even reaching 93%. This also determines that the main consumption of Southeast Asian countries is dominated by long products.

Southeast Asian market outlook

◆ Apparent consumption grows faster

In recent years, the apparent consumption of Southeast Asian countries has grown rapidly. In 2016, the growth rate of apparent consumption in six Southeast Asian countries (Vietnam, Thailand, Indonesia, Malaysia, Philippines, Singapore) reached 12%, reaching 77.37 million tons.

◆ Per capita consumption is low

Except for Malaysia and Singapore, the per capita steel consumption of most Southeast Asian countries is still at a relatively low level, and the apparent consumption of per capita steel is generally low, which is only equivalent to the level of China 20 years ago, which means the future consumption growth of Southeast Asian countries. The space is large.

Chinese companies investing in Southeast Asia

In recent years, due to multiple factors such as rising wage costs and the appreciation of the renminbi, corporate costs have continued to rise, and many Chinese companies have begun to turn their attention to Southeast Asia, where labor costs are cheaper. At present, China's investment in Southeast Asia includes Sinosteel, Formosa Plastics, Baosteel and Delong Steel.

It is undeniable that there are still multiple risks in investment in Southeast Asia, such as local political situation, fundraising, uncertainty of partners, changes in foreign investment policies of Southeast Asian countries, and factory security management.

From the perspective of profitability, most Chinese companies investing in Southeast Asia are still losing money, and there is still a long way to go in the future.