Posted on 16 Jul 2021
The policy changes that China’s central government has announced over the past 12 months relating to steel trade, Beijing’s ‘capacity’ swap scheme and the decarbonization goals for the steel industry have had a great impact on China’s domestic steel market, observed Kimin Tanoto, vice chairman of the Indonesian Iron & Steel Association. But for steel players in the ASEAN region, China’s moves present good opportunities for regional steel industry development, he said on July 13 when addressing SGX’s Singapore International Ferrous Week event.
According to Kimin, the cancelation of tax rebates on Chinese steel exports from May 1 this year meant that Chinese steel mills which used to export in large volumes will now increasingly look to supply their own domestic market.
In this context, the ASEAN steel mills that have faced strong competition from incursions of Chinese steel into their own domestic markets are now in a better position to secure higher steel margins and capture market share, he told delegates. Meanwhile, this also leaves considerable room for ASEAN steel players to export semi-finished and finished steel goods to China.
On the other hand, the market will see Chinese steel mills step up cooperation with regional steel players and undertake additional acquisition or investment in other regions, Kimin also noted. This will be encouraged so that China can secure supplies of steel when Beijing’s policies aimed at controlling steel capacity and production, and at achieving its carbon-neutral goals, cause Chinese domestic steel output to fall, he suggested.
Kimin also mentioned that China’s targets for reducing the use of fossil fuels, plus the strong demand for steel in the infrastructure and real estate sectors, may lead to a supply-demand mismatch, which will challenge the Chinese mills and prompt them to reach outside for steel resources. Against this backdrop, Chinese steelmakers will shift their production offshore and import mainly semi-finished steel products back into China.
“This means that Chinese steel companies either have to build new plants overseas on their own or partner with regional steel mills to secure a stable supply of steel to satisfy their increasing domestic demand,” he remarked.
This makes the ASEAN region well-placed for China to seek steel resources, Kimin believed, with Vietnam and Indonesia being among the top priorities. “I think there's never been a better time for steel and for Indonesia steel companies,” he concluded.
Among the 25 million tonnes of steel exported by the ASEAN-6 countries in 2020, just under half sailed to China, according to the data from Southeast Asia Iron and Steel Institute, making China the largest customer for the region’s steel exports.
Source:Mysteel Global
