Population in ASEAN region is larger than the EU or US. Most countries in ASEAN are in an early stage of economic development. There are significant potentials for economic growth within the region with the third largest labour force in the world, behind China and India, and with more than half of its population living in urban areas.
Mr. T.V. Narendran, Managing Director of Tata Steel (India and South East Asia), made the above observations in his keynote speech at the 2015 SEAISI Conference & Exhibition in Manila, Philippines. He further noted that the ASEAN region is growing promisingly. While China, the largest steel consuming country in the world, is facing a slower pace in economic growth, from 7.4% in 2014 to an average of 6.3% from 2015 to 2020, economic growth in ASEAN is expected to pick up from 4.6% in 2014 to an average of 5.4% from 2015 to 2020.
Major drivers for steel demand growth in the region include the booming construction sector which is benefiting from the implementation of mega projects for infrastructure, housing construction, oil and gas pipeline projects for supply and distribution and the promising growth in automotive industry in many countries in the region.
To fully benefit from the growth potential of the ASEAN steel industry, Mr. Narendran advocated the adoption of different strategies for different industry characteristics, geographies and segments. He remarked that steel industry in ASEAN region is fragmented which has resulted in lack of pricing power and suboptimal scale of the industry. He therefore proposed industry consolidation to minimize the problem.
Mr. Narendran also noted that member countries in the region are at different stages of economic development. The region should focus on countries with low per capita steel consumption such as Laos, Myanmar and Cambodia for the development of steel industry in the region.
Steel consumption patterns in different steel demand driving sectors also differ across countries. There is a need to focus on geographic specialization in each country. For example, Malaysia and Thailand are stronger in terms of demand for flat steel while demand for long steel are growing in other countries.
Mr. Narendran also pointed out that the steel industry in the region is facing disadvantages in key raw material availability. The industry should therefore strive for operational excellence and adopt coast based BF/BOF model. Moreover, there is inadequate port infrastructure leading to uneconomic access to hinterland. Therefore, there is a need for more investment to facilitate port construction in the region.
Mr. Narendran then highlighted two levers to harness the above opportunities and create value. They are: 1) Innovation driven customer, technology and business model. Due to new requirements from customers and evolving technology, innovation horizon would include coming out with higher quality and more advanced steel in the market such as steel for special usage for long distance sea bridges to link countries in AEC countries, steel for natural calamity resistant buildings etc. 2) collaboration within steel, across value chain and between regions. There is a need for industry to industry collaboration to access common market and for the creating of certain infrastructure such as sea transport facilities. ASEAN may also need to cooperate with other regions in order to secure raw materials to establish coast based plant to serve the region.
Finally, Mr. Narendran proposed several policy directions that can help to move the ASEAN steel industry forward in a sustainable manner. They are:
- Faster integration in region towards common market (AEC)
- Improved logistics infrastructure across region
- Fewer restriction for cross ASEAN movement of talent
- Incentives to boost domestic manufacturing
- Protection from low quality imports & stricter norms
- Stricter construction norms facilitating calamity resistance design and
- R&D subsidies with specific focus on new technologies steel