Posted on 26 Nov 2020
Covid-19 has worsened Asia-Pacific steel overcapacity by cutting 2020 demand by up to nearly 9pc, widening a potential supply surplus to more than 20 years of growth, the Southeast Asia Iron and Steel Institute (Seaisi) said in an e-conference this week.
"With Covid-19 it is a double-edged sword. The good thing is it got people to start taking a step back and review the projects that are going on. But demand is down, and overcapacity is really severe," Seaisi secretary general Yeoh Wee Jin said on 24 November.
Seaisi forecasts that 2020 steel consumption in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam will fall by 6.2-8.7pc to 73.3mn-75.3mn t from 2019. That is down from a July forecast of 79.3mn t for the six Association of Southeast Asian Nations countries, or Asean-6.
The Worldsteel Association expects 73.1mn t of demand in 2020 and 77.3mn t in 2021 for Asean-5 excluding Singapore.
There is 67.7mn t of new integrated steel mill capacity proposed in Vietnam, Malaysia, Indonesia and the Philippines. It would take 17 years of 5pc demand growth to absorb that supply, but Covid-19 has added another 2-3 years to that timeframe, he said.
Indonesia's 3.5mn t/yr Dexin Steel has announced it could go beyond an expansion to 6mn t/yr and eventually reach 20mn t/yr, he said. It supplies mostly slab, billet, round bar and wire rod.
Malaysia has been a case study for the impact of overcapacity caused by new entrants. Six listed Malaysian mills incurred losses of nearly 1bn ringgit ($224mn) over 18 months after the start-up of the 3.5mn t/yr Alliance Steel mill, Yeoh said.
Asean countries exported nearly 12mn t of steel within the region in January-August, much of it from Malaysia, Indonesia and Vietnam.
"Malaysia is one of the largest exporters of steel products in the region… Its market has seen a severe overcapacity situation. You cannot sell into your market, so you sell elsewhere," he said.
Malaysia's government forecasts that its construction activity will decline by 18.7pc in 2020 but rebound by 13.9pc in 2021, he said.
Asean countries imported 36.8mn t of steel in January-August, more than 80pc of it from Asia-Pacific origins consisting of mostly flat and semi-finished products.
Auto sales that drive flat steel demand are forecast to decline sharply in 2020, with Vietnam down by 17pc, Thailand down by 37pc, the Philippines down by 20pc, Malaysia down by 22pc, and Indonesia down by 42pc.
"Not a good sign, but at least the worst is over and we're heading for a recovery."
| Asean-6 selected steel exports Jan-Aug | '000s t | ||||
| Destination | Asean-4 | Asean-6 | China | Other APAC | Total |
| 381 Billet | 2 | 409 | 1,643 | 20 | 2,110 |
| 382 Slab | 1 | 19 | 513 | 3 | 590 |
| 384 Semi >= 0.25% | 0 | 235 | 156 | 0 | 419 |
| 385 Others (Alloy) | 0 | 2 | 470 | 29 | 565 |
| 430 Sections | 75 | 286 | 3 | 18 | 513 |
| 440 Bars | 226 | 60 | 1,280 | 66 | 1,743 |
| 450 Wire rods | 152 | 1,136 | 1,145 | 56 | 2,761 |
| 470 Plates | 14 | 343 | 330 | 158 | 960 |
| 480 HR coils/sheets | 7 | 828 | 45 | 20 | 1,422 |
| 510 CR sheets | 3 | 175 | 137 | 235 | 809 |
| Source: Seaisi | |||||
|
Asean-6 Jan-Aug steel exports by region |
'000s | |
| Product | Origin | Volume |
| Billets | Indonesia | 330 |
| Malaysia | 1,052 | |
| Vietnam | 679 | |
| Slabs | Indonesia | 282 |
| Vietnam | 292 | |
| Semis >0.25% | Vietnam | 301 |
| Stainless Semis | Indonesia | 562 |
| Bars (Carbon) | Malaysia | 1,446 |
| Wire Rods | Malaysia | 2,245 |
| Vietnam | 180 | |
| Plates | Indonesia | 703 |
| Singapore | 183 | |
| HRC Stainless | Indonesia | 799 |
| HRC Carbon | Singapore | 318 |
| Vietnam | 191 | |
| CRSS Stainless | Indonesia | 317 |
| Malaysia | 146 | |
| CRSS Carbon | Vietnam | 182 |
| Source: Seaisi | ||
Source:Argus
