Dr. Nae Hee Han: Steel demand in ASEAN region foreseen to double by 2030

Tuesday, 16 October 2018 15:10:59 (GMT+3)   |   Istanbul
       

At the 52nd annual meeting of worldsteel (World Steel Association) held in Tokyo on October 16-17, Dr. Nae Hee Han, director of economic studies and statistics at worldsteel, gave a presentation on the steel market in the ASEAN region (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Brunei, Cambodia, Laos, Myanmar). She pointed out that the ASEAN was initially established in 1967 with five member countries (first five mentioned above), with Brunei joining in 1984 and the others joining in the 1990s, with the aim of promoting peace and stability in the region and to protect members from bigger powers, while in later times its main focus has been economic.

Dr. Han said that the ASEAN region has consistently been one of the world’s fastest growing steel markets since 1998, with an average finished steel use growth  rate of 5.5 percent in the 2008-15 period, reaching an annual volume of 73.8 million mt in 2017, accounting for a 4.6 percent of the global volume in that year. In 2017, the ASEAN region accounted for 8.6 percent of world population, 6.3 percent of global GDP, 9.4 percent of global FDI inflow, and 7.2 percent of the world’s exports and 6.6 percent of its imports - all data which indicate the importance of the region. It is also characterized by considerable diversity (Indonesia represents 42 percent of total land size and 40 percent of population, compared to Singapore accounting for just 0.02 percent of land size), including advanced and emerging economies, with a mix of export-oriented and domestic market-driven economies, and varying degrees of stability.

Dr. Han stated that the ASEAN region is very much outward oriented, operating as an export hub based on cheap labor, while through increasing inward FDI it has been gradually integrated into global manufacturing value chains. It has also become more integrated with global markets through free trade agreements. A lot of the region’s connectivity plans are lined to China’s One Belt, One Road (OBOR) initiative. Meanwhile, intra-regional trade accounts for 25 percent of the region’s total trade (compared to 64 percent in the EU).

Turning to steel, Dr. Han stated that steel output growth in the ASEAN region has been lagging behind steel use growth, with the region being the largest net importing region, with 50 million mt of net imports in 2017. While the region accounts for 1.6 percent of crude steel production, it has a share of 13.4 percent of world imports. Steel production is mainly via the EAF route, she indicated, but with the BOF share on the rise. Vietnam stands out as the largest crude steel-producing and steel-using country in the region, with respective shares of 44 percent and 29 percent in 2017. Indonesia’s respective shares were 20 percent and 19 percent, while Thailand’s were 17 percent and 22 percent.

Construction accounts for 75 percent of steel use in the ASEAN-6 countries (original five members plus Vietnam), followed by the automotive sector with seven percent, while it has a high dependence on extra-regional imports (with a 92.9 percent share in 2017, with intra-regional imports making up just 7.1 percent of total imports), especially from China which exported 21.3 million mt to the region in 2017, followed by Japan with 12.5 million mt.

Focusing the drivers of steel demand in the region, Dr. Han listed strong macroeconomic fundamentals such as a young and large population, urbanization and rising middle class, improved financial stability and a steady inflow of FDI, though also referring to negative issues in some countries such as debt problems and political stability. Vietnam and Philippines are increasingly attracting FDI inflows, with Japanese and South Korean FDI focused on manufacturing. Infrastructure levels vary among all countries, while urban water supply lags behind in most countries, Dr. Han indicated, also adding that the residential sector has large potential. Further focal points for steel demand growth are automotive and shipbuilding, she said, with Indonesia having the highest potential in the auto industry.

Summing up, Dr. Han stated that steel demand in the ASEAN region is foreseen to double by 2030, reaching 145 million mt, driven by less developed countries, making ASEAN one of the fastest growing steel markets. Steel capacities have started to grow rapidly with increased Chinese involvement. Political instability and the uncertain global trade environment are risk factors, she said.

 


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