ASEAN Steel Industry: Steel Market DevelopmentsSteel Market Developments a presentation at: 2021...

Yeoh Wee JinSecretary General

South East Asia Iron and Steel Institute

Singapore ▪ Malaysia ▪ Indonesia ▪ Myanmar ▪ Philippines ▪ Thailand ▪ Vietnam | Australia ▪ South Korea ▪ Taiwan

ASEAN Steel Industry: Steel Market Developmentsa presentation at:2021 Steel Committee Meeting, OECD19 March 2021

About the South East Asia Iron & Steel Institute (SEAISI)

Indonesia • Malaysia • Myanmar • Philippines • Singapore • Thailand • Vietnam | Australia • South Korea • Taiwan

for the

Steel

Industry,

by the

Steel

Industry,

in

ASEAN

Representsthe Steel

Industry inthe 7 Largest

ASEAN Economies

SupportingMember Countries

Countries

Members

Since

kEmployees

❑ ASEAN Economies amid COVID19

❑ Impact on the ASEAN Steel Industry

❑ The Investment Scenario

❑ Current & Emerging Policies & Trends

❑ Summary

3

OUTLINE:

• COVID19 Status

• Reactions

• Impact

4

COVID19 PANDEMIC IN ASEAN (1/2)ASEAN countries’ success in containing COVID-19 is mixed; Some countries are keeping the pandemic under control, but there’s still work to be done in others

Number of Infections (Daily)

Source: Harvard Dataverse, Our World in Data 4

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1 Jan 20 1 Mar 20 1 May 20 1 Jul 20 1 Sep 20 1 Nov 20 1 Jan 21

Indonesia

Malaysia

SingaporeThailand

Vietnam

Philippines

Indonesia4,714/d

1,425,044

Malaysia1,208/d324,971

Philippines5,404/d626,893

Singapore12/d

60,117

Thailand78/d

27,500

Vietnam1/d

2,554

14 Mar 2021

COVID19 PANDEMIC IN ASEAN (2/2)Impact on economies depends on early action, severity of controls, border closure and reopening of economy while managing the pandemic well

Source: SEAISI Research & Analysis 5

First Case Borders Closed5 4 3 2 1

Severity of Lockdown

Indonesia*Jakarta 56d

Malaysia47 days

PhilippinesManila 78d

Singapore56d

Thailand*Bangkok 42dCurfew 30d

Vietnam*15d

ASEAN-6 COVID Timeline of Lockdown Actions (Approximate)

Jan20 Feb20 Mar20 Apr20 May20 Jun20 Jul20 Aug20 Sep20 Oct20

1. Early Action

2 Severity of Controls

3. Controls Reimposed

3. Controls Reimposed

4. Resurgence of COVID

5. Resumption of Int. Flights

Notes: * Construction and Steel Industry considered essential and were not shut down

6

HOW ARE ASEAN-6 ECONOMIES DOING? (1/1)GDP fell to a major low in Q2 2020 due to lockdowns; 2H shows improvement after easing of lockdowns; Vietnam is the only country with positive growth

Source: Various ASEAN country statistics

Quarterly GDP Growth from Q1 2019 to Q4 2020 (year-on-year %)

+5.1

+4.5 +5.7+1.0

+2.9+6.8+5.1 +4.8

+5.4

+0.2+2.4

+6.7+5.0+4.4

+6.3

+0.7

+2.6

+7.5

+5.0+3.6

+6.7

+1.0

+1.5

+7.0

+3.0+0.7

-0.7 -0.3 -2.0

+3.7

-5.3

-17.1 -16.9

-13.3-12.2

+0.4

-3.5-2.7

-11.4

-5.8 -6.4

+2.7

-2.2

-3.4

-8.3

-3.8 -4.2

+4.5

-20.0

-15.0

-10.0

-5.0

+0.0

+5.0

+10.0

Indonesia Malaysia Philippines Singapore Thailand Vietnam

Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020Q3 2020Q4 2020

2020 -2.1% -5.6% -9.5% -5.8% -6.1% +2.9%

7

HOW ARE ASEAN-6 ECONOMIES DOING? (2/4)Severe restrictions in Malaysia, Philippines & Singapore affected ConstructionIndustry; Thailand, Vietnam construction activities on an uptrend

Source: Various ASEAN country statistics, ASEAN country local news, RICS Survey

+5.9

+0.3+5.0

+1.4+3.0 +6.7

+5.7

+0.5

-0.1

+2.3+3.4

+9.1+5.7

-1.4

+15.3

+3.1

+2.7

+9.7

+5.8

-1.0

+10.7 +4.3

-2.1

+9.6

+2.9

-7.9

-2.9-1.2

-9.3

+4.2

-5.4

-44.5 -30.4

-60.0

+7.5 +4.7

-4.5

-12.4

-39.8-47.0

+10.8 +5.7

-5.7-13.9

-25.3

-28.5

-0.3

+5.6

-70.0

-60.0

-50.0

-40.0

-30.0

-20.0

-10.0

+0.0

+10.0

+20.0


Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Quarterly Construction Growth from Q1 2019 to Q4 2020 (year-on-year %)

2020 -3.3% -19.4% -26.0% -33.7% +2.0% +6.8%

8

HOW ARE ASEAN-6 ECONOMIES DOING? (3/4)The automotive industry appears to be heading towards a recovery after a steep drop but 2.85 million vehicle production in 2020 is still 31.6% below 2019 figures


Monthly Auto Production from Jan 2018 – Sep 2020 (‘000 vehicles) • April 2020: Worst month with only 51k vehicles (vs 330k in April 2019, 84.6% drop)

• Production Size (2020):

‐ Thailand 50%

‐ Indonesia 24%

‐ Malaysia 17%

• 2.85 million vehicles produced in 2020, 31.6% decline from 4.2 million vehicles in 2019

• Auto production across the region in 2020

‐ Thailand: -29.1%

‐ Indonesia: -46.3%

‐ Malaysia: -15.1%

0

50

100

150

200

250

300

350

400

450

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19

May

-19

Jul-

19

Sep

-19

No

v-1

9

Jan

-20

Mar

-20

May

-20

Jul-

20

Sep

-20

No

v-2

0

Total Auto Production

Thailand

Indonesia

Myanmar

VietnamPhilippines

Malaysia

9

HOW ARE ASEAN-6 ECONOMIES DOING? (4/4)Similarly, the Manufacturing sector was equally impacted in most countries except Vietnam (continuing growth) & Singapore (electronics & medical goods )


Quarterly Manufacturing Growth from Q1 2019 to Q4 2020 (year-on-year %)

2020 -2.9% +2.6% -9.5% +7.1% -5.7% +5.8%

+3.9 +4.2 +5.2

+0.0+0.2

+12.4

+3.5

+4.3

+2.0

-2.7

+0.1

+10.0+4.1

+3.6

+0.9

-0.7 -0.8

+11.7

+3.7+3.0

+4.3

-2.3 -2.2

+9.8

+2.1 +1.5

-3.8

+7.9

-2.4

+7.1

-6.2

-18.3-20.7

-0.8

-14.7

+3.2

-4.3

+3.3

-9.7

+10.0

-5.3

+3.9

-3.1

+3.0

-4.3

+9.5

-0.7

+5.6

-25.0

-20.0

-15.0

-10.0

-5.0

+0.0

+5.0

+10.0

+15.0


Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020Q3 2020Q4 2020





❑ Summary

10

OUTLINE:

• Steel Consumption

• Production

• Imports

• Exports

ASEAN-6 STEEL DEMAND / CONSUMPTIONASEAN-6 steel consumption is about 80 million tonnes in 2019; The top 3 steel consuming countries are Vietnam, Thailand and Indonesia

ASEAN 6 – Apparent Steel Consumption (million MT)

Source: STECO, worldsteel, SEAISI Research & Analysis 11

4952

5963

6671

79 7680 80

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vietnam24 m MT

Thailand18 m MT

Philippines10 m MT

Malaysia9 m MT

Indonesia16 m MT

Singapore 2 m MT

3934

H12019

H12020E

H1 2020 vs H1 2019

-12.3%

2020E

~70 m MT(-12.4%)

12

ASEAN-6 imports have declined to 41.9 million tonnes from 51.2 million in 2019, a decrease of 18.2%

Source: SEAISI statistics

ASEAN Finished Steel Import from 2016 – 2020E (million MT)m MT

ASEAN FINISHED STEEL IMPORTS

6.9

7.5

5.4

4.1

12.3

17.5

53.7

7.1 7.1

5.6

3.4 11.0

15.0

49.2

7.6

7.2

6.0

3.7 11.7

14.4

50.6

8.4

6.6 5.4

3.4

11.9

15.5

51.2

5.6 5.3 4.9

2.7

10.1 13.2

41.9

0

10

20

30

40

50

60

Indonesia Malaysia Philippines Singapore Thailand Vietnam ASEAN

2016

2017

2018

2019

2020E

2020 Growth

-33% -19% -9% -15% -18% 18%-15%

13

ASEAN-6 exports jumped 23% from 15.5 million tonnes to 19.1 million tonnes in 2020, as China growth those who have the right connections

Source: SEAISI statistics

ASEAN Finished Steel Export from 2016 – 2020E (million MT)m MT

ASEAN FINISHED STEEL EXPORTS

2020 Growth

+7% +146% -% -19% -5% +23%-6%

0.8 1.1 0.1

1.8

1.1

3.8

8.6

1.3 1.4

0.1 1.3

1.2

4.7

10.0

2.6 1.2

0.1

1.4

1.5

6.6

13.4

3.3 2.7

0.0

1.6

1.2

6.6

15.5

3.6 6.7

0.0

1.5

1.0

6.3

19.1

0

5

10

15

20

25

Indonesia Malaysia Philippines Singapore Thailand Vietnam ASEAN

2016 20172018 20192020E

Indonesia’s export jump came from increase in

capacity and exports of plates and

stainless steel

Malaysia’s export

increase is due to

exports of long

products and semis

Vietnam’s earlier export increase

is due to exports of HRC





❑ Summary

14

OUTLINE:

• Capacity Map

• Capacity Update

RISE OF THE INTEGRATED MEGAMILLS (CARBON STEEL) 1/2Eastern Steel (MY) 2 million MT2018(r) : FLP 0.7 m MT2022 : FP 1.3m MT

WenAn Steel (MY) 10 million MT2021/22 : FLP 10m MT

Dexin Steel (ID)20 million MT2020/21 : LP 3.5m MT2022 : FLP 2.5m MT? : FLP 14.0m MT

Panhua Group (PH)10 million MT 2022? : FP 10m MT

Hebei Bishi Group (ID)3 + 3 million MT2019/20 : 3.0m MT

Hoa Phat Group (VN)4 million MT + 5 DQ22019 : LP 2.0m MT2020/21 : FP 2.0m MT

HBIS SteelAsia JV (PH)8 million MT (?)2023? : LP 4.5+3.5m MT2026? : LP 4.5+3.5m MT

Formosa Ha Tinh (VN)22.5 million MT2017 : FLP 7.5m MT20?? : FLP 7.5m MT20?? : FLP 7.5m MT

Baowu Steel Grp (KH)3.1 million MT? : 3.1 m MT (RL)

Updated: March 2021

Krakatau Steel (KS) / Krakatau POSCO (KP)10 million MT (ID)<2014 : FP 1.8 m MT(KS)2014 : FP 3.0 m MT(KP)2019 : FP 1.2 m MT(KS)2025? : FP 3.0 m MT(KP)2025? : ? 1.0 m MT

Gunung Group (ID)1.5 million MT2021 : FP 1.5m MT

Source: Various public sources, SEAISI Research & Analysis

KIV?

Kunming IS/Baowu? 4 million MT (MM)? : FLP 2 + 2 m MT

Fuhai Indonesia (ID) 2 million MT2021/22 : LP 2.0m MT

Alliance Steel (MY)3.5 million MT2017/18 : LP 3.5m MT

Legend:China Korea/Indonesia Taiwan/Japan Local ASEAN

RL Relocate

Latest updatedRecently installed

FP Flat ProductsLP Long ProductsFLP Flat & Long ProductsHG High Grade

N

U

N

N

N

N

U

U

U

Hoa Sen Group (VN)16.0 m MT FLP U

For Sale

Sinosteel (ID)USD 2.7 billion

N

U

U

U

N

U

Oriental Shield / Megasteel (MY)5.5 million MT2021 : FP 3.0m MT? : FP 1.5m MT ? : LP 1.0m MT(HG)

U

U

U

U

UPDATE ON INVESTMENTS (2/2)COVID19 put a halt in many investment projects in ASEAN, while some have announced the continuation or expansion of projects in 2020 & 2021

16Source: SEAISI Research & Analysis

• The bulk of investments (mostly from China) have been delayed

• Dexin Steel in Indonesia expanding from 3.5 million tonnes in 2021 to 6.0 million tonnes in 2022 and is supposed to reach 20 million tonnes in the future

• The restart of Megasteel facilities (3.0 million tonnes) under a new entity called Oriental Shield is expected to take place mid 2021.

⁻ They have also announced their intention to build a blast furnace in the near future (~3.5 million tonnes)

⁻ With this announcement, the flat products sector will soon be in an overcapacity, with or without WenAn Steel coming up with their 10 million tonne project in East Malaysia

• Krakatau POSCO has announce a potential expansion of another 3.0 million tonnes of flat products for their project in Indonesia, to be up by 2025 latest

• Hoa Phat Dung Quat plant expanded 2 million tonnes a year to produce long products in 2019. Another 2 million tonnes of hot rolled flat products capacity will be up this year





❑ Summary

17

OUTLINE:

• Regional Comprehensive Economic Partnership

• Decarbonisation at China

REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP(1/2)RCEP targets to eliminate 90% tariffs in 20 years and to encourage free flow of goods, services and investment across the partnership area

18

Population

2.2 billion~30% of World

GDP

USD 26.2 tn~30% of Global GDP

NAFTA USD 24.4 tnEU USD 19.4 tn

Asia Pacific

15 CountriesWorld’s

LARGEST Trade Bloc

Includes

5 of 20 G20 Countries

Signed

15 Nov 2020

Covers FTAs for

China-JapanJapan-South

Koreafor the First Time!

Effective Date

2022?60d after ratification by 6/10 ASEAN Countries and 3/5 Partners (CN)

RCEP – CHAPTER ON INVESTMENT (2/2)The RCEP actually prohibits / discourages any efforts to stymie the free flow ofinvestments across the partnership geographies

19

Article 10.3: National

Treatment

Treat me like you treat your

own investors

Article 10.7: Senior Mgmt and

Board of Directors

Don’t set requirements to

directly or indirectly control the

investment / entity

Article 10.4: Most-Favoured-

Nation Treatment

Treat me like you treat other

Parties

Article 10.6: Prohibition of Performance Requirements

a. Do not set restrictions such as export quota, achievement

of domestic content quota, domestic purchase / use quota

and other restrictions relating to exports or FX earnings

b. No transfer of technology, process or knowhow

(excl Cambodia, Laos, Myanmar)

c. No supply of goods exclusively from the territory of the

Party to a specific regional market / world market; or

d. No royalty arrangements under an existing licence, unless

this is between investor and the Party (excl KH, LS, MM)

Exceptions from 10.4 – 10.7:

• Existing non conforming

measures and policies

• Amendments that are not

worse off

Exclusions from entire Investment Chapter:

• government procurement;

• subsidies or grants provided by a Party;

• services supplied in the exercise of governmental authority

• measures covered in other chapters or pre-existing ones

Source: https://rcepsec.org/legal-text/

20

President Xi Jinping’s pledge• Peak carbon emissions in 2030• Carbon Neutral by 2060

Carbon Neutral TargetsSep 2020

1

Steel Capacity Swap Ratios• Generalo Focused Areas: 1.5o Other Regions: 1.25

• Acquired Capacity Swap Ratio: o Focus Areas: 1.25o Other Regions: 1.1

• Switching to Cleaner Technologieso BF/BOF to EAF: 1.0o EAF to EAF: 1.0o BF to H2, Corex, Finex, HISmelto Stainless Steel with RKEF+AOD

Supply Reform Policies on the Steel Sector

▪Excess Capacity

▪Consolidation

Dec 2020

2nd Draft

3

DECARBONISATION OF THE CHINA STEEL INDUSTRY (1/1)Decarbonisation efforts are likely to see more investments overseas as capacities close down in China and these may “shift” to the region

Potential Medium / Long Impact

• Target: average PM2.5 density o <= 45 μg/m3 Oct-Dec 2020 ando <= 58 μg/m3 Jan-Mar 2021

• Steel Plants to be renovated

Upgrading Air Quality @ Yangtze DeltaOct 2020Draft

2

1. Drive local producers up the value chain

2. Indirectly encourage investments or “shifting” of projects overseas

▪ Steel

▪ Coke

3. Diversification

4. Pressure on Scrap Availability in the region and the world

Source: worldsteel





❑ Summary

21

OUTLINE:

22

IN SUMMARYWhile COVID19 had delayed investment projects in ASEAN, regional policies and investment dynamics are likely to see more steel investments entering ASEAN

• ASEAN will continue to recover from the pandemic as vaccination is underway

• The Asia Pacific region will be among the first regions to recover from the

pandemic

• Steel project investments, while delayed or postponed, are likely to return to

ASEAN. Why?:

− Because of the “push” factor coming from the Decarbonisation of the Steel

Industry in China (Supply Reforms & Environmental Control)

− Because of “pull” factor, considering that ASEAN remains an attractive

investment destination and a fast growing economic region

− Technologies that are likely to be “transferred” or “re-invested” are

expected to be those that are environmentally pollutive that cannot

conform to the latest standards in China

− Risk of impact of Free Trade due to the RCEP continues to be present and

the benefits of the RCEP to the Steel Industry remains to be seen

Wee-Jin YEOH

Secretary General

South East Asia Iron and Steel Institute

Singapore ▪ Malaysia ▪ Indonesia ▪ Myanmar ▪ Philippines ▪ Thailand ▪ Vietnam | Australia ▪ South Korea ▪ Taiwan

ASEAN Steel Industry: Steel Market DevelopmentsSteel Market Developments a presentation at: 2021...

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