As a result in the slowdown of the world economic growth due to the global financial crisis, global steel demand grew only 1.2% y-o-y to 1,413 million tonnes in 2012. The World Steel Association has projected that global steel consumption will grow at a slow pace of 2.9% in 2013 and 3.2% in 2014.
Amidst the sluggish growth in world steel demand, steel consumption in ASEAN managed to buck the trend and registered a healthy compound annual growth rate (CAGR) of 12% from 2009 to 2012. However, the increase in steel demand is largely met by imports while regional steel production has stagnated. The three major sources of steel import in ASEAN are Japan, China and South Korea.
Japan was the largest source of import of steel in ASEAN. Steel import from Japan into the region in 2012 was nearly 12 million tonnes, accounting for 25% of total import in the region.
Steel import from China was 11 million tonnes in 2012, accounting for 24% of total import in the region. Import from China surged sharply, registering a CAGR of 55% for the period of 2009 to 2012.
Import from South Korea, the third largest source of steel import into ASEAN, accounted for 15% of total steel import or around 7 million tonnes in 2012.
Despite the sluggish market condition, major steel producers around the world continued to expand their production capacities. Nippon Steel & Sumitomo Corporation from Japan increased its capacity from 32 million tonnes in 2005 to 47.9 million tonnes in 2012. China’s Hebei Iron & Steel Group expanded its capacity by nearly three folds within 7 years to 42.8 million tonnes in 2012, while China’s Baosteel Group’s production capacity increased by 20 million tonnes to 42.7 million tonnes over the same period.
According to the Korea Institute for Industrial Economics and Trade (KIET), China’s steel making excess capacity increased substantially since 2007. Excess steel-making capacity in China rose from below 80 million tonnes in 2006 to above 150 million tonnes in 2007 and the momentum has been maintained such that by 2013, China’s excess capacity is already more than 200 million tonnes. Meanwhile, excess capacity in Japan and South Korea has been maintained at around 50 million tonnes and 20 million tonnes, respectively.
In light of the above situation, it is not surprising that the three countries have been active in the export market.
Japan’s steel export increased moderately by CAGR 2.4% from 2000 to 2012 while export to ASEAN showed a higher rate of increase of 4.6% during the same period. On the other hand, China’s export of steel to ASEAN grew significantly by CAGR of 21% from 2000 to 2012. ASEAN is also the major steel export destination for South Korea. ASEAN accounted for around 23% of South Korea’s total steel export and the volume increased by CAGR of 12% from 2000 to 2012.