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ASEAN Steel Industry

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TBS Toulouse -SEA 2023 – Svetlana Novikova

s.novikova@tbs-education.org
+33 787769751
International Business
Toulouse Business School
2022-2023
ASEAN Steel Industry.

Steel has been a very valuable commodity for centuries, and its usage has increased
dramatically in recent decades. For instance, according the data of World Steel Association,
between 1950 and 2018, annual global production increased from 200 megatons (Mt) of crude
steel to 1804Mt.
Nowadays, the growth of steel production has slowed down slightly. In this way, in just
during at 8th months of 2022, almost 1254 million tons steel were produced by 64 countries,
which are accounting more than 98% world steel manufacturing, but it is per 5% less than in
the same period of 2021.
According the most researchers, current crisis in ferrous metallurgy industry can
continue till the end of first half of 2023. It is related with high price of coking coal, as well as
reduction of the pace of construction, as well as demand and prices for steel production.
ASEAN countries before COVID pandemic consumption more then 80 million tons per
year, in 2021 this number was decreased to 72 million tons, but already in 2022 there is
expectation of increasing per almost 5% to 76 million tons. During 2023 it is expected to return
to pre-pandemic amount and will consist 81 million tons. The strongest support for demand is
provided by main six countries – Vietnam, Indonesia, Singapore, Malaysia, Thailand,
Philippines. There is recovery of construction and automobile industry will lead to significant
growth of steel consumption in above mentioned countries.
However, ASEAN is not only strong player in steel world consumption, it can be
considered as the develop steel producer.
According the Steel Association data, during 2019-2020 total capacity of steel
production in ASEAN countries was about 70 thousand tons per year. So significant amount
of growth, compare with 2016 when produced only 20 thousand tons per year.
Today ASEAN region is emerging market in different kind of industry, from
construction to automobile sectors, and all of them directly related with steel industry.

PESTEL analysis of key ASEAN countries in steel industry (Vietnam, Indonesia, Singapore,
Malaysia, Thailand, Philippines):

POLITICAL:

Main factors for this sector are demonstrated in the table below (Table 1). As we can
see almost every country has a high corruption score (except Singapore), but however, despite
that fact, most of them have a stable political environment.
Every mentioned above country is a member of different kind of association and
prestigious organizations, as EAS (East Asia Summit), APEC (Asia-Pacific Economic
Cooperation), WTO (World Trade Organization), but on the scene of steel industry all of them
are active members of Southeast Asia Iron and Steel Institute (SEAISI), which was
incorporated in 1971 under the auspices of the Unite Nations Economic Commission for Asia
and the Far East (ECAFE). The main aim of this organization is sustainable development of
ASEAN steel industry, in partnership with global institutions and experts, as well as to fill the
gap between demand and supply of the steel inside ASEAN. To maximize the steel production
and to increase it up to million tons are also the main activity and objective of SEAISI. The
main idea is that with the growing industry will growth the local steel sector.

Table 1. (Government details in key players in steel industry of ASEAN)

 Corruption
Country Government Notes
(score)
- The president is a head of state
and the commander-in-chied of the - Corruption is a problem. Government has been
military; making a lot of efforts to eradicate since 2016;
- The prime minister is the head of - Freedom of expression, association, and peaceful
the government; public assembly are strictly restricted.
Vietnam - The role of communist party is
39
- As the Communist Party of Vietnam controls the
asserted virtually in all spheres of country’s media, journalists and media platforms often
life; risk sanctions for presenting sensitive topics and for
-Very poor record in human rights; criticising the government.

- Presidential and constitutional - Corruption is widespread throughout the country,

republic; particularly in government institutions and businesses.
- The president is the head of state, - There is a problem, with demand for independence in
Indonesia the head of government, and the
38
several provinces is a challenge for the country.
commander -in-chief of the - Many analysts are concerned about the country’s
Indonesian National Armed Forces. political instability.
- Federal constitutional Monarchy,
comprises 13 states and 3 federal - Corruption is a major problem;
territories.; - Malaysians accessing basiv services such as school,
Malaysia - The monarch is the head of state; 48 hospitals, and even courts are allegedly requires to pay
- The prime Minister is the head of a ‘sweetener’;
government;
- Politically very stable country.
- Parliamentary democracy;
- The President is the head of state; - The third least corruption country in the world;
- The prime minister is the head of Singaporeans face severe restrictions on their basic
Singapore government;
85
rights to freedom of expression, association, and
- The focus of the government on peaceful assembly.
attracting foreign direct investment.
- Nominally constitutional
monarchy, and also a parliamentary
democracy.
- The hereditary monarch is the
head of state and is protected by
lese-majeste (to do wrong to - Most sectors have high risks of corruption;
Thailand majesty) laws which allow any 35 - Corruption hampers economic and social
critics to be sentenced to jail for 3- development.
15 years.
- The prime minister is a head of
government.
- Country’s military seized power
in a coup that took place in 2014.
- Presidential system;
- Unitary state;
- The President is a head of - Corruption is a major problem in the country;
government, and the commander - - Despite the fact that there are a lot of local and
Philippines in-chief of the armed forces;
33
international criticisms, the political environment is
- Bangsamoro Autonomous Region relatively stable.
in Muslim Mindanao is free from
the control of the government.

ECONOMY:

The ASEAN’s economy grew tremendously in the last two decades, though it was
heavily hit by the Asian financial crisis in 1997. Similarly, global lockdowns in 2020 have also
slowed down the economy, though moderate recovery is evident.
Common numbers of current economy situation are provided in Table 2.
Table 2 (Economy rank, GDP, tax, rate in key players in steel industry of ASEAN)
Largest GDP
Corporate Unemployment
Country economy in Notes
tax rate rate
rank billion
- The country has made a lot of progress
eradicated and lifted 45 million people out
of it between 2002 and 2018;
- It has positive and robust economic
outlook tendency;
- Vietnam has come out as largest
beneficiaries of the trade dispute between
China and the USA;
- Most exports go to the USA, China,
Vietnam 40 362,6 20% 2,17% Japan, South Korea, Gernamy;
- Exports goods are broadcasting
equipment, telephones, integrated circuits,
textile and leather footwear;
- Imports from China, Japan, South Korea,
Honk Kong, and Singapore;
- Top imports’ goods are computers,
electrical goods, telephones, mobile phones
and parts, instruments and accessories, and
textile fabrics are some of its top imports.
- Expected to reach around $1270Bl in the
end of 2022 (+7%);
- Private companies and foreign investors
dominate the economy;
- Government is one the largest owners of
businesses;
Indonesia 16 1,186 22% 6,49% - The biggest industries are agriculture, oil
and gas, mining, hospitality, automotive,
and hydrocarbons;
- Commodities imports from China,
Singapore, Japan, Malaysia, and Thailand.
- Most of exports go to China, the USA,
Japan, India, and Singapore.
- The economy environment is healthy and
robust;
- Very high focus on industrialized, and
knowledge-based industry;
- Economy
- Major exports from Malaysia are
integrated circuits, refined petroleum,
office machine parts, petroleum gas, and
Malaysia 38 372,7 24% 4,61% palm oil;
- Exports destination are China, Singapore,
the USA, Japan, Hing Kong;
- Top imports are integrated circuits,
refined petroleum, crude petroleum,
broadcasting equipment, and office
machine;
- Impots mostly come from China,
Singapore, the USA, Japan.
- One of the four Asian Tigers or Asian
Dragons due to highly developed
economies with highly educated and
productive work forces (Four Asian – Hong
Kong, Singapore, South Korea, Taiwan).
Singapore 36 397 17% 3,62% - Forecast of GDP growth is expected to
reach $425Bl in the end of 2022 and
$449Bl during 2023 (+7% and +5,6%);
- 14th largest export economy in the world;
- Low taxes and other incentives to foreign
investors;
 - Top exports are integrated circuits,
computers, semiconductor devices, gas
turbines, refined petroleum, gold,
diamonds, refined copper, broadcasting
equipment, and raw tin;
- Main export destinations are China, Hong
Kong, Malaysia, Indonesia, and the USA;
- Key imports good are integrated circuits,
refined petroleum, crude petroleum, gold
and computers;
- One of the largest recipients of foreign
direct investment in the world.
- Has a great economic progress and moved
from a low-income to an upper-income
country in a relatively short time;
- Sustainable and impressive poverty
reduction efforts;
- One of the largest export economies in the
world;
- Main exports are machinery including
computers, electrical equipment, vehicles,
mineral fuels, broadcasting equipment,
Thailand 24 506 20% 1,5% organic chemicals, and plastics;
Main imports are gold, vehicle parts, crude
petroleum, integrated circuits, and office
machine parts;
- Economy grew at a slow rate (in fact,
slowest in five years) in the second quarter
of 2019. The main reasons are sluggishness
in export, flagging domestic demand and
crisis between US – China in trade world
market;

- The main industries are travel, tourism,

agriculture, manufacturing, mining and
mineral processing, pharmaceuticals,
shipbuilding and electronics;
- Top trading partners are China, Hong
Philippines 37 394,1 30% 5,3% Kong, The United States, Japan, Germany,
South Korea and Thailand;
- Good country to invest, because of the
low business set-up cost, strategic location,
and the availability of a top-notch
workforce.

Steel industry is concern to be a very booming industry from past decades. Opening up
with the various economies the foreign direct investments is the happened in this sector the
various foreign players are interested to invest in the ASEAN region.
Under the various economies schemes there is permission in advance licensing scheme
which allows the duty-free imports of raw materials for exports, it is one of the most attractive
aspects in order to develop steel industry.
During the last decade steel industry is also facing the problem of the subprime crisis,
in The United States was a multinational financial crisis that occurred between 2007 and 2010,
which contributed to the 2007-2008 global financial crisis. Because of the subprime crisis and
then global financial crisis there is ill effect occurs in the automobile industry, infrastructure
and other businesses which are directly related with the steel industry. It has lead to the huge
gap between the demand and supply in the steel in the society around the world.
At the same time, despite on the forecast of world crisis in steel industry, which is
expected to continue till the end of first half of the 2023, ASEAN’s steel industry is not
correlating with these patterns and shows us incipient growth.
 As SEAISI notes in its report, in the next few years, the steelmaking capacity in the
countries of ASEAN may increase sharply due to the construction of number of large
metallurgical enterprises, mainly with Chinese investments.
According to SEAISI estimates, by 2026, the total steelmaking capacity in Southeast
Asian countries may increase to 151 million tons per year compared to 70 million tons at the
2020. At the same time, more than 50 million tons of growth will be accounted for by projects
with Chinese investments.
In 2020, the consumption of steel products in the ASEAN countries was estimated
about 81 million tons, and by 2026 its volume may increase to about 105-115 million tons.
Thus, if at least half of the announced projects are implemented, the region, which is currently
a large net importer, will become redundant in steel.

SOCIAL LANDSCAPE:
The next element to discuss in the PESTEL analysis is the social environment. Total
Southeast Asia population is 684, 836,417 and equivalent to 8.58% of the total world
population (based on the latest United Nations estimate). Actual population for each country
are interested in steel industry are provided in the table 3.
Looking into the steel industry, ones should be mentioned, that the social landscape is
one of the important aspects in the analysis. It is very important to describe the impact of the
particular industry on the society.
Developing of steel industry gives the encouragement to the permanent employment to
the people and decrease unemployment. In the same time, from the other hand it splits the area
in to the rural and urban sectors, because the industry is only in the particular area only which
leads to the particular development of that area only and not overall the development.
Because of the working conditions the people which are employees in the steel industry
faced many health problems which are incurable in the nature and many industries are not
paying the attention on the health of the employees.
Any kind of the allowances are not given to the employees. Steel industry is also
responsible for the development in the rural sector which leads to the rise in the standard of the
living of the people.

Table 3 (Population in key players in steel industry of ASEAN)

Country Population Notes
Strengths - Large working age population;
Challenges - Low women’s participation in the job market;
Vietnam 98,17 mln
Future prospects - Socio economic development plan 2021-2025;
Future risks - Dragging human development.
Strengths - Social assistance and cash transfer programs;
Challenges - Low spending on healthcare;
- Low rank in Gender Gap Report;
Indonesia 276,4 mln
Future prospects - Measures to boost healthcare sector;
- Poor social development indicators;
Future risks - Religious intolerance.
Strengths - Improvement on HDI;
- Working age population;
Challenges - Restricted freedom;
Malaysia 32,78 mln - High youth unemployment rate;
Future prospects - Government needs to address women inclusivity;
- Advancement in healthcare;
Future risks - Unequal distribution of income.
Strengths - Bridging gender gap;
- High human development index;
Singapore 5,45 mln
Challenges - Low birth rate;
- High income disparity;
 Future prospects - Strong healthcare system and hospital reforms;
Future risks - Aging population.
Strengths - Improving life expectancy and healthcare initiatives;
Challenges - Inadequate refuge policy;
Thailand 69,95 mln
Future prospects - Employment opportunities;
Future risks - Rising poverty.
Strengths - Bridging gender gap;
Challenges - Child labor;
Philippines 111 mln
Future prospects - Universal health insurance;
Future risks - Drug trafficking.

TECHNOLOGICAL:

Usually, steel industry has a lot of old manufacturing, which don’t have innovation in
the use of the technique in the production process. Since many years the industry is using the
traditional technologies.
Nowadays steel industry in ASEAN active began using technology e-market, which is
the biggest market and selling of the steel in the world.
As it was already mentioned before, steel industry in ASEAN is having participation
from both public sector and private sector enterprises, and in the same time it is one of the
fastest growing markets steels. Many factories are developing the online trading.
Only the electric furnace is being used now days in the production process but because
of the fluctuation in the energy there is wastage in the raw material. The basic technologies are
used in the production process are basic are, induction furnace and nature.
New constructed metallurgical plants are going to be more modern and technological.
In particular, the Chinese company WenAn Steel proposes to build a metallurgical plant with
a capacity of 10 million tons per year in the island part of Malaysia. And the companies Panhua
Group and HBIS (in cooperation with the local SteelAsia) are going to build plants for 10
million and 8 million tons per year in the Philippines, respectively.
Three major Chinese carbon steel projects have been announced in Indonesia. In
addition, Chinese companies have proposed to build integrated metallurgical enterprises with
a capacity of 4 million and 3 million tons per year, respectively, in Myanmar and Cambodia.
Indonesian Krakatau Steel, which has established joint ventures with Japanese and
Korean companies, is also planning to expand capacity from the current 4.8 million to 10
million tons per year. Finally, the construction of new metallurgical plants in Vietnam will
continue.

ENVIRONMENTAL:

Though the steel industry is encouraging the, any sectors and the encouraging the
development it is creating the unfavorable environment in the nature. The all leading industries
are following the environmental acts which are declares be the governments, creating very bad
impact on the environment.
Many industries are using the pollution control equipment and energy saving equipment
but that is not sufficient in the nature.
New vector in steel industry is the Ultra-low Carbon steel making where will be
reduction in the environmental loss.

Table 4 (Easy doing business score) in key players in steel industry of ASEAN)
Easy doing
Country Notes
business
 Vietnam 70 Improving renewable energy production
Indonesia 73 Low total tax rate
Malaysia 12 Effective environmental laws and signatory to international pacts.
Singapore 2 Strong governing indicators
Thailand 21 Improving life expectancy and healthcare initiatives
Philippines 95 Rich biodiversity

LEGAL:

Government is introducing the various rules and regulations of this particular industry.
The government is about to paying the more attention in the health policies of the employees
which are working with the steel industry. Special health incentives and rules are introduced in
the steel industry. Particular wellness inducements and regulations are introducing in the steel
industry.

Political, economic and technical aspects are more important for the development of
the particular industry. If these factors are not in the supporting in the favor of any industry
them the industry face some consequences.
SEAISI sees the short-term impact of the conflict between Russia - Ukraine on steel
trade in the ASEAN region, since the parties to the conflict are not the main sources of imports
of both semi-finished and finished metal products.
SEAISI notes that although the import of slabs from Russia was very significant, the
Russian Federation is not the only source of imports.
As the GMK Center reported, the World Steel Association in its forecast expects global
steel consumption to grow by 0.4% in 2022 compared to 2021 – up to 1.840 billion tons. In
2023, the growth rate of global steel consumption will accelerate to 2.2% compared to the
previous year – up to 1.881 billion tons.

Bibliography:

1. Market line Macroeconomic outlook report (Vietnam, Indonesia, Singapore,

Malaysia, Philippines, Thailand) https://advantage-marketline-com.hub.tbs-
education.fr/Analysis?reporttype=5910&location=100141-100183-100209-100230-
100250&q%5B%5D=macroeconomic%2Boutlook%2Breport&exactword=1
2. The article - “Southeast Asia’s steel surge”
https://www.woodmac.com/news/opinion/southeast-asias-steel-surge-how-will-
the-region-manage-overcapacity/
3. Unemployment rate https://www.statista.com/statistics/444617/unemployment-
rate-in-vietnam/
4. SEAISI official web site https://www.seaisi.org/our-committees

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