After nearly 13 years as Secretary General, I will be retiring from SEAISI and this will be my last message for this Newsletter.
I officially assumed the post of Secretary General of SEAISI in January 2007, being the first from the ASEAN member countries to hold this position. Prior to that, all the Secretaries-General of SEAISI were seconded from the Supporting Member countries of SEAISI i.e. Australia, Japan, South Korea and Taiwan.
As I reflect over my years of service with SEAISI, I can’t help but feel grateful for the privilege of being part of the SEAISI family and being able to witness first-hand the tremendous growth and development of the ASEAN steel industry over the last decade or so.
From 2007 to 2018, apparent steel consumption in ASEAN-6 (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) grew at a compound annual growth rate (CAGR) of 5.7%, from 43 million tonnes in 2007 to 80 million tonnes in 2018. Production of hot-rolled steel products also increased from 25.5 million tonnes to 42.8 million tonnes over the same period. To-date, ASEAN is one of the few regions in the world that is expected to see continued healthy steel consumption growth rates into the foreseeable future. It is also one of the biggest steel importing regions in the world.
The growth of the steel industry in the region did not come about without its challenges. One of them is the 2008 global financial crisis which led to a sharp drop in regional steel consumption of more than 9% year-on-year in 2009. However, steel demand in the region quickly recovered the following year and has been on the growth path ever since.
The biggest challenge to hit the steel industry in ASEAN and also the world came in 2014 and 2015. During that period, the global economy was going through a difficult phase as the markets tried to adjust to slower levels of growth in the Chinese economy, which saw China’s apparent steel consumption contracting by as much as 3.3% and 5.4% year-on-year in the two years respectively. As China was the single largest steel producing and steel consuming country in the world, the impact on the global iron and steel industry was profound.
Struggling with weak domestic demand, China’s steel producers turned to exports. As a result, China’s finished steel export to the world surged from 62.2 million tonnes in 2013 to 93.8 million tonnes in 2014 and reached a record high of 112.4 million tonnes in 2015.
South East Asia, being in China’s backyard, had to bear the brunt of this surge in Chinese steel export. As a consequence, ASEAN absorbed almost one-third of the total Chinese steel export volume to the world. Even more damaging was the sharp drop in steel prices which fell to record lows in October 2015. The influx of low-priced steel products from China into ASEAN forced many steel companies in the region to curtail their production and many of them were in dire financial straits while a few even had to cease production altogether.
Thankfully, the global steel market started to recover in 2016, spurred by the rebound in domestic steel demand in China following the implementation of stimulus measures and supply side reform by the Chinese government. The steel market in ASEAN also gradually returned to normalcy, enabling the steel companies in the region to turnaround.
While the steel industry in ASEAN is in a better footing now, many developments in the region and around the world will continue to bring new challenges to the industry. The ongoing U.S.-China trade war, the uncertainties surrounding Brexit and the expected slowdown of global economic growth will all have impact on steel consumption growth.
Additionally, a recent development will have even bigger long-term impact on the steel industry in ASEAN and it is the surge in steel investment interests in the region, particularly from China. Chinese steel investments have been present in ASEAN for some time now but up until recently, they were confined mainly to the smaller players and the projects were relatively modest in scale. However, in the last two to three years, there has been a sudden surge of integrated mega steel projects (3-10 million tonnes capacities each) from China, with some of the biggest steel producers in the country such as HBIS Group, Baowu Steel Group and Jianlong Steel Holdings all entering the fray. So far, the Chinese steel companies have been focusing their investment interests mainly in the three ASEAN countries of Indonesia, Malaysia and Philippines.
It is estimated that if all the Chinese steel projects were to be implemented and come on stream, more than 50 million tonnes of new crude steel production capacity would be added in the region. This will certainly bring about significant changes in the iron and steel industry landscape in ASEAN.
Going forward, it is going to be an exciting and challenging time for the iron and steel industry in ASEAN. Thus, while I will no longer be in the thick of all the happenings in the steel industry in the region, I will still follow all the developments closely and I wish the industry well.
Now, it is time for me to finally say goodbye. I must mention that I have enjoyed my time with SEAISI and that it has been a great privilege for me to be associated and work with all the wonderful people in the steel fraternity, in the region and across the globe.
All my very best wishes to each and every one of you.
TAN AH YONG