Six ASEAN countries steel production increased speed
Recently, the relevant person in charge of the Southeast Asian Iron and Steel Association said that the steel production capacity in Southeast Asia continued to increase. Although the construction industry in the region continued to grow, the growth in steel consumption was far less than the increase in steel production capacity. In the first half of 2019, the apparent consumption of steel in ASEAN countries increased by 5.9% year-on-year to 39 million tons, of which the consumption of plate materials increased by 8.7% year-on-year, while the consumption of long products grew slowly at 3%. For the full year of 2019, steel consumption in the six ASEAN countries is expected to increase by 4% year-on-year to 83 million tons, compared with an increase of 5% in 2018. The ASEAN countries currently have a steel capacity of 83.7 million tons. Assuming that all the combined steel plants are under construction and the planned projects are fully operational, it is expected that by 2026, the steel capacity in this region will increase to 144.2 million tons. Assuming that steel consumption increases by 4 million tons per year, it is difficult to achieve a balance between supply and demand in recent years.
Among the six ASEAN countries, Indonesia has the fastest growth in steel consumption. In 2018, its apparent steel consumption increased by 11% year-on-year to 15.1 million tons; Thailand was the slowest growth rate, increasing by only 1.0% to 19.23 million in 2018. Apparent consumption of steel in the Philippines increased rapidly, reaching 9.2% to 10.7 million tons in 2018; Vietnam ’s total consumption was the highest, reaching 22.3 million tons in 2018, a year-on-year increase of 3.1%; Singapore and Malaysia had less total consumption , The growth rates in 2018 were 3.7% and 3.5%.
Data from the Indonesia Iron and Steel Association show that Indonesian steel consumption is expected to increase by 50.3% from 15.1 million tons in 2018 to 22.7 million tons by 2024, driven by demand in the construction and automotive industries. The annual consumption of the construction industry accounts for about 78% of the country’s total steel consumption, of which about 40% is used for infrastructure construction, and the remaining 38% is used for non-infrastructure construction.
According to data from the Southeast Asian Iron and Steel Association, demand for Indonesian long products in the first half of 2019 increased by 9.7% year-on-year to 2.9 million tons, while local production increased by 11.3% to 2 million tons. In the case of increased production, the import volume of long products in the first half of the year decreased by 3.4% year-on-year to about 1 million tons, and due to the increase in domestic demand, exports fell to 119,700 tons.
Construction industry/ automotive industry affect the increase in steel production
Indonesia’s economic growth is still mainly driven by manufacturing and construction. If the Indonesian economy grows by 5.3%, domestic steel consumption is expected to increase by 7%. Relevant Indonesian authorities expect the construction industry to grow 5.7% in 2020, while economic growth is expected to be 5.3% -5.6%. In 2020, the growth of the construction industry is still higher than the average economic growth level, which will lead to an increase in the utilization rate of capacity, especially due to the development of infrastructure, the utilization rate of long products will increase.
In addition to the construction industry, Indonesia’s automotive industry will also boost steel demand. Indonesia is ASEAN’s largest auto market, with 1.15 million vehicles sold in 2018. ASEAN countries sold about 3.16 million vehicles in 2018 and are expected to increase to 4.49 million by 2026.
Due to Thailand’s weak economy, steel exports, production and domestic consumption will decline in 2019. Data from the Thai Iron and Steel Association show that in the first nine months of this year, Thai steel output fell by 18.7% year-on-year to 5.74 million tons; steel exports fell by 15.3% year-on-year to 1.11 million tons.
Exports contribute two-thirds of Thailand’s GDP. According to the third quarter data from the Thai Economic and Social Development Agency, exports of major products such as refined fuels, passenger cars and pickups, chemicals and petrochemicals have declined. In the third quarter, Thailand’s GDP increased by 2.4% year-on-year, slightly higher than the 2.3% in the second quarter, but this is a lower level since the third quarter of 2018, which also caused the agency to predict the full-year GDP of 2019. It was lowered to 2.6% from 2.7% -3.2%. At the same time, from January to September this year, Thai steel consumption fell 5.1% year-on-year to 14.01 million tons. It is worth noting that the consumption of long products decreased by 9.5% year-on-year to 5.22 million tons, which was mainly due to the weakening demand for construction steel and structural steel. In the third quarter, the Thai construction industry grew by 2.8% year-on-year, lower than the 3.5% in the second quarter and 4.6% in the third quarter of 2018.
Due to the slowdown in economic growth, the Thai Industry Federation will reduce its forecast for Thailand’s auto production in 2019 to 2 million from the previous 2.15 million, citing a decline in both domestic sales and exports; auto exports are expected to be reduced from 1.1 million To 1 million. Data show that from January to September, Thailand ’s auto output fell 2% year-on-year to 1.57 million units, and exports fell 4.4% to 820,000 units.
Regarding the economic slowdown, the Bank of Thailand ’s Monetary Policy Committee ’s fourth quarter outlook report believes that the Thai economy will face higher risks in the future, especially external risks, such as trade tensions, the economic prospects of China and advanced economies, and geopolitical risks. Both will have an impact on domestic demand. In the short term, Thailand will use monetary policy when necessary, and if economic growth fails to meet expectations, other actions will be taken.
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