Performance of the ASEAN Iron and Steel

Industry in 2015 and Outlook

Presented by:
Tan Ah Yong
Secretary General
South East Asia Iron and Steel Institute (SEAISI)
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

Economic Indicators

 IMF lower down its projection for world economy to grow at 3.09% in 2015
and 3.16% in 2016. Advanced economies’ GDP growth rate is projected to
maintain at 1.9% in 2015 and 2016.
 China’s growth will slow down from 6.9% in 2015 to 6.5% in 2016 and will
continue to decelerate to 6.2% in 2017.
 India’s economy growth rate in 2015 was revised from 6.3% to 7.3% and
the rate is predicted to increase to 7.5% in 2016.
 ASEAN-5 economies is expected to maintain at 4.8% in 2015 and 2016 and
will expand to 5.1% in 2017.

3
Source : IMF World Economic Outlook updated April 2016
Economic Indicators
Philippines
Vietnam

Indonesia

Malaysia

Thailand

Q1, 2016 GDP growth (%y-o-y)

Singapore Philippines 6.9

Vietnam 5.5

Indonesia 4.9

Malaysia 4.2

Thailand 3.2

Singapore 1.8

4
Source : Trading Economics and various sources
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

 Apparent Steel Consumption in ASEAN (tonnes)

2014 2015P % change 14/15

Vietnam 14,441,000 18,270,000 26.5%
Philippines 7,324,727 8,759,700 19.6%
Singapore 3,833,196 4,015,522 4.8%
Malaysia 10,079,085 10,134,210 0.5%
Thailand 17,323,257 16,694,528 -3.6%
Indonesia 12,897,528 11,375,467 -11.8%
ASEAN 65,898,793 69,249,427 5.1%

 ASEAN’s apparent steel consumption in 2015 increased by 5% y-o-y to 69.2

million tonnes
 Vietnam registered highest growth rate (26.5%) followed by the Philippines
(19.6%) and Singapore (4.8%). Malaysia’s steel demand remained stagnant with
0.5% y-o-y growth rate.
 Thailand and Singapore experienced declines in growth rate, at -3.6% and -12%,
respectively
6
Source : SEAISI 6
 ASEAN steel consumption continues to grow healthily

Global
financial
Asian crisis
financial
crisis

Vietnam not
included

N.A.

1971 1980 1991 2008 2014 2015P

Indonesia ID 610,000 3,010,000 4,060,280 8,822,855 12,897,528 11,375,467
Malaysia MY 620,000 1,750,000 3,517,942 8,490,548 10,079,085 10,134,210
Philippines PH 810,000 1,280,000 1,883,236 3,560,267 7,324,727 8,759,700
Singapore SG 940,000 1,670,000 2,465,013 3,643,395 3,833,196 4,015,522
Thailand TH 800,000 1,190,000 6,236,248 13,465,906 17,323,257 16,694,528
Vietnam VN N.A. N.A. 249,000 8,183,626 14,441,000 18,270,000

ASEAN 3,780,000 8,900,000 18,411,719 46,166,597 65,898,793 69,249,427

Source : SEAISI 7
 ASEAN steel consumption still mainly served by imports

Unit: tonnes

2014 2015P % Growth

Production* 27,522,466 28,736,507 4.4%
Import 46,377,658 48,769,173 5.2%
Export 8,001,331 8,256,253 3.2%
Consumption 65,898,793 69,249,427 5.1%
* Hot rolled production only

8
Source : SEAISI
 ASEAN steel consumption grew by 5% y-o-y in 2015 and is
expected to maintain steady growth rate of around 5-6% p.a. in
the near term

Apparent Steel Consumption in ASEAN (million tonnes)

ASC is expected to
surpass 80 mt in 2018

9
Source : SEAISI
 ASEAN steel consumption per capita
Unit: kg
Steel consumption per capita 2011 2012 2013 2014 2015P 2016F 2017F 2018F
Indonesia 45 51 51 51 45 46 48 51
Malaysia 283 302 336 329 327 341 355 370
Philippines 54 62 68 73 86 87 91 94
Singapore 742 720 792 701 725 730 732 733
Thailand 215 241 258 252 243 244 247 251
Vietnam 110 123 131 159 199 221 240 262
ASEAN 100 110 117 120 125 130 136 143

P = Preliminary
F = Forecast

CAGR 1998-
2015P
6.3%

10
Source : SEAISI
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

 Indonesia:
Steel consumption growth in downward trend since 2011

tonnes

Indonesia 2014 2015P % growth '14-15

Production*
- Crude Steel 4,351,245 4,854,200 11.6%
- Finished Steel 6,474,515 6,167,615 -4.7%
Import 7,401,021 6,514,825 -12.0%
Export 978,008 1,306,973 33.6% CAGR ‘11-15
Consumption 12,897,528 11,375,467 -11.8% 1%
* Production of hot rolled products only

Source : SEAISI
 Malaysia:
Steel consumption growth has moderated

tonnes

Malaysia 2014 2015P % growth '14-15

Production*
- Crude Steel 4,316,000 4,043,241 -6.3%
- Finished Steel 4,759,091 4,360,184 -8.4%
Import 7,036,252 7,214,009 2.5% CAGR ‘11-15
Export 1,716,258 1,439,983 -16.1% 5.3%
Consumption 10,079,085 10,134,210 0.5%
* Production of hot rolled products only

Source : SEAISI
 Philippines:
Steel consumption continued to register strong growth rate

Philippines 2014 2015P % growth '14-15 tonnes

Production*
- Crude Steel 1,195,865 968,022 -19.1%
- Finished Steel 3,272,689 4,013,251 22.6%
Import 4,052,038 4,846,449 19.6%
Export 0 100,000
Consumption 7,324,727 8,759,700 19.6% CAGR ‘11-15
14.1%
* Production of hot rolled products only

Source : SEAISI
 Singapore:
Steel consumption growth pattern reflective that of a mature market

tonnes

Singapore 2014 2015P % growth '14-15

Production*
- Crude Steel 575,096 510,037 -11.3%
- Finished Steel 540,000 501,221 -7.2%
Import 5,187,864 5,101,445 -1.7% CAGR ‘11-15
Export 1,894,668 1,587,144 -16.2% 1.1%
Consumption 3,833,196 4,015,522 4.8%
* Production of hot rolled products only

Source : SEAISI
Thailand:
Country registered second consecutive year of decline in steel
consumption

tonnes
Thailand 2014 2015P % growth '14-15

Production*
- Crude Steel 4,094,682 3,717,922 -9.2%
- Finished Steel 6,819,171 6,495,235 -4.8%
Import 11,645,483 11,187,445 -3.9%
Export 1,141,397 988,153 -13.4% CAGR ‘11-15
Consumption 17,323,257 16,694,528 -3.6% 3.5%
* Production of hot rolled products only

Source : SEAISI
 Vietnam:
Country experienced rapid growth in steel consumption since 2013

tonnes
Vietnam 2014 2015P % growth '14-15

Production
- Crude Steel 5,847,000 5,647,000 -3.4%
- Finished Steel 5,657,000 7,199,000 27.3%
Import 11,055,000 13,948,000 26.2% CAGR ‘11-15
17.2%
Export 2,271,000 2,919,000 28.5%
Consumption 14,441,000 18,228,000 26.2%
* Production of hot rolled products only

Source : SEAISI
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

Finished Steel: Demand & Supply
Share of steel consumption
100%

Steel consumption (million tonnes)

19
Source : SEAISI
Finished Steel: Demand & Supply

Unit: million tonnes

Long steel 2014 2015P % Growth

Production* 20.21 22.40 10.8%
Import 15.73 15.74 0.1%
Export 3.00 2.73 -9.1%
Consumption 32.12 35.41 10.3%

Flat steel 2014 2015P % Growth

Production* 7.31 6.34 -13.3%
Import 30.65 33.03 7.8%
Export 5.01 5.53 10.3%
Consumption 33.78 33.84 0.2%
* Hot rolled production only

20
Source : SEAISI
 ASEAN: China is the predominant source of steel imports
Million tonnes (otherwise stated)
2009 2010 2011 2012 2013 2014 2015
33.0 39.4 42.1 50.1 54.6 57.2 62.5
- Semi-finsihed Steel 9.6 9.6 8.1 9.8 9.7 10.8 12.7
- Section, bar & wire rods 4.7 5.9 6.9 8.4 11.2 12.3 13.8
- Hot-rolled sheets & strips 9.6 11.4 13.9 16.5 17.8 18.4 19.2
- Cold-rolled products 3.7 4.7 4.9 5.2 5.1 4.9 5.0
- Coated sheets & strips 3.0 4.8 5.1 6.2 6.6 6.6 7.2
- Others 2.4 3.1 3.4 4.0 4.2 4.1 4.6
y country
- Thailand 8.9 12.0 12.2 14.8 15.6 14.7 14.6
- Vietnam 8.5 8.0 6.8 8.0 9.2 11.7 15.9
- Indonesia 5.5 7.3 9.2 11.7 12.0 12.3 11.2
- Malaysia 3.7 5.0 4.8 5.6 6.4 7.2 7.7
- Singapore 3.7 4.0 5.2 5.2 6.0 5.2 5.3
- Philippines 2.8 3.1 3.8 4.6 5.4 6.1 7.8
s of import 2009 2010 2011 2012 2013 2014 2015*
- Japan 23% 28% 26% 26% 25% 23% 20%
- China 13% 19% 20% 26% 30% 42% 52%
- South Korea 11% 13% 16% 15% 13% 12% 10%
- Russia 13% 10% 7% 8% 6% 4% 2%
- Taiwan 10% 8% 8% 7% 7% 7% 6%
- India 2% 1% 1% 1% 3% 1% 2%
- Intra-ASEAN 10% 8% 8% 6% 5% 5% 5%
21
Source : SEAISI
Despite the institution of various trade measures against imports
from China, ASEAN countries still unable to stem the tide of steel
exports from China
Thailand’s AD against China Indonesia’s AD against
on China on
- HRC/S, boron added - HRC
HRC - Tinplate
- Section - CRC stainless
- CRC, CRC stainless - HRP
- HDG, ZnAl - CRC/S
- HC wire rod, LC wire rod - Section
- Stainless pipes & tubes
- Pipes & tubes Vietnam’s AD against China
on
Malaysia’s AD against China - CRC stainless
on - Galvanized sheet
- Wire rod
- Electrolytic tinplate
- HRC
- CRC
- Color coated sheet

22
 China resurfaced as a major supplier of semis to ASEAN despite
having a 25% export duty

Million tonnes
12.7mt (2015) 2015

Major Importers in the Region

23
Source : SEAISI
How do they do it?
 Exports of semi-finished steel, including billet and
slab, subject to 25% export duty.

 Exports of carbon bar subject to 15% export duty.

5,440,000
 No export duty on alloy bar and exporters eligible
to claim a tax rebate of 13%.
11,900,000
 Exporters make use of the loopholes in the
country’s export tax and rebate structure to bring
out “alloy square bars” which are actually square
64,000
billets, thereby not only avoiding the payment of
7,180 25% export duty but also benefiting from the 13%
export tax rebate.

 Up until 31 December 2014, producers only

2,660,000
needed to add a minimum of 0.0008% boron to the
20,739 carbon bar to be able to declare as alloy bar and
be eligible for the tax rebate while avoiding the
payment of export duty.

 When the tax rebate for boron-added steel bar was

3,538 removed on 1 January 2015, producers started to
switch to adding a minimum of 0.3% chromium and
continue to benefit form the tax and rebate
loopholes.
(Scale: million tonnes)
 It is estimated that some 4 million tonnes of square
China’s export to ASEAN, recorded by China’s customs billet from China found their way into the ASEAN
market in 2015 in the above manner. 24
ASEAN’s import from China, recorded by each ASEAN’s customs
 Major sources of import of long steel in ASEAN 2015
Million tonnes
Major Importers in the Region

2.7 mt
(2015)

6.3 mt
(2015)

25
Source : SEAISI
 ASEAN’s bar import
2015
Major Importers in the Region
Million tonnes
9 mt (2015)

 Out of the 9 million tonnes, it is believed that around 4

million tonnes constituted imports of square bar used as
billet, mainly to Philippines and Vietnam

26
Source : SEAISI
 Major sources of import of flat steel in ASEAN 2014
Million tonnes
Major Importers in the Region
4.14 mt
(2015)

15.1 mt
(2015)

27
Source : SEAISI
 Major sources of import of flat steel in ASEAN 2014
Million tonnes
Major Importers in the Region
5.0 mt (2015)

7.2 mt
(2015)

28
Source : SEAISI
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

 Significant Developments
 In 2015, the ASEAN
steel industry continued
to face intense
competition from
imports, low steel
prices and tight margin
squeeze. As a
consequence, many
companies were in
difficult financial straits.
 Despite the removal of
export rebate on several
boron-containing steel
products by the Chinese
 Many countries in the
government effective 1
region intensified their
January 2015, steel
efforts in invoking
exports from China to
trade measures to
ASEAN continued to
protect their domestic
increase unabated, with
steel industries from
volume surging 33%
the unfair competition
year-on-year for the
from low-priced
whole of 2015.
imports, the bulk of
which were targeted
at steel exports from
China.
30
 Significant Developments (cont)
 The regional steel groupings,
 In 2015, 18 cases of anti-
dumping and safeguard
actions were recorded
involving three (3) initiation
of investigations, seven (7)
reviews, six (6)
imposition/renewal/extension
of duties and two (2)
termination of investigations.
Up till mid-May 2016, 11
cases were recorded
comprising four (4)
initiations, six (6)
imposition/extension and one
(1) termination.
through the ASEAN Iron and
Steel Council (AISI), were
particularly active in 2015 in
championing the plight of the
steel industry in the region
which was severely affected
by the intense competition
from low-priced steel exports
from China. Besides meeting
with the China Iron and Steel
Association (CISA), the
Council also made two
representations to the
ASEAN-China FTA Joint
Committee on the problems
faced by the industry.
 Due to the depressed market
conditions, the steel sector in
the region saw little
investment activities in 2015.
The most significant
development was the
commissioning of the
Formosa Ha Tinh Steel
Corporation’s hot strip mill
plant in Vietnam in December
2015 to produce hot rolled
coil. The long awaited blow-
in of the company’s first blast
furnace is set to take place in
early June 2016.
31
CONTENTS:

 Macroeconomic Scenario

 Steel Production and Consumption

- ASEAN
- By country

 Demand and Supply

 Significant Developments

 Outlook and Conclusions

Outlook and Conclusions

 The ASEAN-6 continued to show resilient growth

in steel demand with total apparent steel
consumption increasing 5% year-on-year in 2015
to reach 69 million tonnes.

 The growth in steel consumption in 2015 saw a

parallel increase in volume of steel imports which
rose 5.2% year-on-year while regional production
of hot-rolled products saw a moderate growth of
4.4% year-on-year.

 Going forward, ASEAN economies are expected

to see healthy growth in the near to medium term
which will boost steel consumption in the region.

 The ASEAN-6 is projected to be able to maintain

a steady growth in steel consumption of around
5%-6% per annum and total apparent steel
demand is expected to exceed 80 million tonnes
in 2018.

33
Outlook and Conclusions

 Philippines and Vietnam are expected to continue to see strong growth in steel
demand while Indonesia and Thailand will start to return to growth path and see
gradual increase in steel consumption.

 Steelmakers in the region will continue to face intense competition from cheap
imports, particularly from China.

 The ability of the Chinese government in making good its intention of cutting down
excess steel production capacity in the country will be monitored closely by the
regional steel groupings which will continue to put pressure on the Chinese side to
effectively address the issue.

34
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