ASEAN-6 Steel Consumption Increases by 5% in 2018, Indonesia Tops the Chart

Steel consumption in the six ASEAN countries that includes Indonesia, Malaysia, Philippines, Singapore, and Thailand has registered a growth of 5% y-o-y basis at 80 MnT against 76.3 MnT in 2017. Also unlike last year all the six countries have registered positive growth in the steel demand, according to the SEAISI (South East Asia Iron and Steel Institute) recent data.

Indonesia records the highest growth of 11% in steel consumption

The highest growth in the apparent steel consumption in 2018 has been registered by Indonesia at 11% at 15.08 MnT followed by Philippines at 10.5% at 10.85 MnT. The ongoing construction projects have helped to boost up the steel demand contributing to the stronger steel consumption growth rates in both the countries.

The other three countries Malaysia, Singapore, and Vietnam have registered moderate consumption growth rates in 2018 while Thailand's steel demand inched up marginally by 1% y-o-y. The construction sector remains the main driver of steel consumption in all the ASEAN-6 countries.

Three countries record double-digit growth in steel output

In terms of production, the overall steel production of ASEAN-6 increased significantly by 16% y-o-y basis in 2018. Vietnam, Indonesia, and Philippines registered double-digit growth rates (at above 20% y-o-y each) in finished steel production at 14.5 MnT, 10.01 MnT, 5.16 MnT respectively whereas Malaysia's production was somewhat stagnant at 3.80 MnT and production in Singapore and Thailand dipped slightly at 5.83 MnT and 9.03 MnT respectively.

Product-wise the regional production of hot-rolled steel products continued to expand, with production volume surging 16% y-o-y to 43 MnT in 2018.

Vietnam- the biggest steel exporter in ASEAN-6

As per the customs data, Vietnam is by far the biggest steel exporter in ASEAN. Vietnam exported only around one million tonnes of steel products in 2010 but the volume started to surge since 2013. Finished steel export from Vietnam was above 6 MnT in 2018, a growth of 41% y-o-y basis. On the other hand, Indonesia's steel exports doubled from 1.35 MnT in 2017 to 2.56 MnT in 2018. Malaysia's steel exports declined from 1.4 MnT to 1.2 MnT in 2018 while no change was registered in the export numbers of Philippines. Singapore's steel exports surged by 15% to 1.44 MnT in 2018 and that of Thailand increased by 20% to 1.5 MnT.

ASEAN continues to remain net steel importer

Finished steel import growth in most of ASEAN-6 countries slowed down in 2018. Vietnam is the only country that experienced a continued decline in steel import, dropping 4.4% y-o-y in 2018. A major portion of the import in the region was high-quality steel, mainly to serve the manufacturing sector. One of the main reasons for the slowdown in steel import growth in ASEAN region was the increase in domestic production to serve domestic demand and to substitute import.

SEAISI's outlook for 2019

o Indonesia's construction industry is expected to grow by 7.1% in 2019. Indonesian and Chinese companies signed five cooperation contracts worth USD 23.3 billion encompassing projects in Indonesia that would be part of the Belt and Road Initiative.

o Strong growth in Indonesia's residential and non-residential buildings sector over the next 5-10 years will be driven by rapid urbanization and industrialization trends in the country.

o Philippine government's 'Build-Build-Build Programme' and the construction of new telecom and transmission towers will boost up demand with many infrastructure projects.

o Thailand's infrastructure investment plan is taking off, with numerous projects in the pipeline. Timeline for major infrastructure projects in Eastern Economic Corridor (EEC) is on track.

o Vietnam is ranked the second highest in infrastructure spending within the 6 ASEAN countries, behind Philippines. Vietnam's limitation with funding is solved by inviting foreigners to participate in PPP schemes, especially from Japanese firms.

o Thailand and Indonesia are the two production hubs for the automotive sector in ASEAN and in 2019 Indonesia's total vehicle production volume will surge by 10.4% y-o-y basis whereas that of Thailand will increase by 1-4%.