Message from Secretary General_October 2015

Posted on 05 November 2015
 

Source: SEAISI
According to the World Steel Association (worldsteel), the steel industry has reached the end of a major growth cycle which was based on the rapid development in China. It accordingly forecasted that global steel demand will decline by 1.7% to 1.513 billion tonnes in 2015, down from 1.54 million tonnes in 2014. In its latest short-range outlook report, worldsteel, however, projected that global steel demand will rebound slightly by 0.7% to 1.523 billion tonnes in 2016.

China’s steel demand is expected to contract by 3.5% this year to 685.9 million tonnes, following a 3.3% year-on-year decline to 710.8 million tonnes in 2014. For 2016, worldsteel expects China’s steel demand to continue to retreat, by some 2%, to 672.2 million tonnes.

For the other major steel consuming economies, steel demand in the USA is also expected to drop by 3.5 % to 103.8 million tonnes in 2015 before picking up by 1.3% to 105.2 million tonnes in 2016. The EU-28, on the other hand, is forecast to see modest steel demand growth of 1.3% this year to 149.8 million tonnes, and further increase by 2.2% to 153.1 million tonnes in 2016.

As for the other countries in Asia, Japan’s steel consumption is forecast to see a rather significant drop of 5.4% this year to 64 million tonnes before rebounding with a growth rate of 3% in 2016 to 66 million tonnes. In contrast, India is performing better than expected with its steel demand forecasted to rise by 7.3% to 81.5 million tonnes this year and by another 7.6% in 2016 to 87.6 million tonnes.

For ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam), worldsteel expects the grouping’s steel demand to continue to see moderate growth rates of 3.5% and 3.4% in 2015 and 2016 respectively.

The low growth environment for the steel industry has led to a situation where the industry is now undergoing a painful restructuring with prices and demand of steel products both at record lows. The major contributing factor is of course the slow down in steel consumption in China compounded by the country’s chronic excess steel production capacity.

According to the China Iron and Steel Association (CISA), China’s apparent consumption of crude steel fell 5.8% year-on-year in the first nine months of 2015 while data released by the National Bureau of Statistics showed only a 2% drop in the country’s crude steel output over the same period. This supply-demand imbalance has led to a continual decline in steel prices.  As a consequence, CISA reported that medium and large-sized steelmakers in China posted total losses of US$ 4.4 billion in the first nine months of this year.

The fallout from China steelmakers’ struggles is also hurting other steelmakers across the globe. As steel mills in China seek new channels to absorb their excess output, China’s steel exports rocketed and reached 83.11 million tonnes in the first nine months of 2015, up 27% year-on-year. At this rate, China’s steel exports will certainly breach 100 million tonnes this year, an all time high.

The huge outflow of steel products from China at record low prices is disrupting steel markets across the world leading to heightened trade tensions. Many steel mills, including those from ASEAN, are struggling to keep their businesses afloat.

How are the steelmakers in ASEAN coping with the challenges? I will try to assess the situation when I present an “Update on ASEAN Steel Industry Development Scenario” in the session on “Steel Market Developments” at the upcoming 2015 ASEAN Iron and Steel Sustain ability Forum which will be held in Kuala Lumpur, Malaysia on 30 November to 2 December 2015. At the same session, an expert from Wood Mackenzie will examine the “Future Direction of China’s Steel Exports” while a representative from Platts will present “Steel Raw Material Outlook and Trends”.  Mr. Le Phuoc Vu, Chairman of Hoa Sen Group of Vietnam, will also share with us his views on “Increasing Cooperation in Developing of Steel Industry among ASEAN”.

Another highlight of the Forum is the special focus on the construction sector which will feature three (3) dedicated sessions on the sector i.e. Construction Management & Sustainability; Smart Systems for Steel Construction; and Steel Material & Innovative Product Developments.

There is still time to register and participate in this interesting and informative event of the Institute.
   TAN AH YONG


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