ASEAN steel demand and supply after AEC

Posted on 03 April 2013
 

Source: SEAISI
Following the onslaught of the Asian Financial crisis in 1977, steel demand in ASEAN slumped from a high of 33.6 million tonnes in 1996 to a mere 19.5 million tonnes in 1998. It took the region more than four years before its steel consumption returned to the pre-crisis level.

However, the recent global financial crisis which started in 2008 only led to a 11% dip in steel demand in ASEAN in 2009 and steel demand in the region recovered rapidly after that. In fact, steel consumption in ASEAN has been growing at a compound annual growth rate of 10.7% from 2009 to 2012 and is expected to grow healthily in the next few years.

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With the coming into place of the ASEAN Economic Community (AEC) in 2015, steel demand in the region is expected to be further boosted with the implementation of various infrastructure projects to enhance ASEAN connectivity.

ASEAN imported a total of 37 million tonnes of steel products in 2012. Approximately 80- 90% of the total import volume was the import of commodity steel mainly for construction and ship building. ASEAN has the capability to substitute about 47% of the total imports without the need to invest into more advanced technologies. That being the case, ASEAN’s semi-finished steel production has the potential to increase by 55% y-o-y, long steel and flat steel output by 30% and 163% y-o-y, respectively. With the new steel capacity expansion plan in the region, it is expected that by 2014 there will be some 51 million tonnes of semi-finished steel capacity in the region, 49 million tonnes of long product capacity and 43 million tonnes of hot rolled flat product capacity. However, with the expected increase in production level, capacity utilization is still low.

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Meanwhile, steel demand for the construction sector is expected to increase robustly to serve the new development of infrastructure for ASEAN connectivity, following the realization of AEC in the near future. The question is whether or not ASEAN can boost up its capabilities to serve the new demand?


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