ASEAN apparent steel consumption may rise marginally in CY'24; key consuming sectors seen slowing

• Construction, auto may witness declines this year
  
  
• Manufacturing sees mixed trend, fabrication dips
  
  
• SWIP may see marginal increase next calendar
  
  

Morning Brief: Apparent steel consumption in the Association of Southeast Asian Nations (ASEAN) is expected to rise a marginal 0.3 million tonnes (mnt) to 8.2 mnt in 2024 from a level of 7.9 mnt in 2023. Real steel consumption is slated to increase to 7.9 mnt from 7.7 mnt in this period, as per a report from the Malaysian Iron & Steel Industry Federation, a copy of which is in the possession of BigMint.

As per the Ministry of Finance of Singapore, which works with ASEAN and other regional partners to support economic prosperity, has forecasted that in 2024, the region's GDP will grow 4-5% and manufacturing growth will likely increase by 3.5%.

Major steel consuming sectors performance in 2023 and forecast for 2024

Construction growth may decline: Construction has the lion's share of 63.2% in the total steel consumption pie in ASEAN. This sector is hugely supported by the civil engineering sub-sector.

The year 2023's growth in the construction sector was at a higher 6.1% against 5% in 2022. Quarterly figures reveal that Q4 (October-December, 2023) rose 3.6% against Q3's (July-September, 2023) 7.3%.

In Q4CY'23, growth of the construction sector was hugely supported by civil engineering which grew 16.8% (Q3 2023: 14.6%). However, residential buildings and specialised construction activities eased to 1.3% (Q3 2023: 6.2%) and 0.5% (Q3 2023: 10.4%) respectively.

The report says that the steel weighted industrial production (SWIP) growth in construction in 2024 is expected to fall to 5.1% from 5.9% in 2023 but is estimated to recoup to 5.5% in 2025.

Manufacturing to see mixed fortunes: Manufacturing saw growth slowing to 0.7% against a robust 8.1% in 2022. Q4CY'23 contracted further by 0.3% against a decline of 0.1% in Q3CY'23.

The contraction was attributed to a poor performance in the electrical and electronics subsector which further declined to -8.5% in Q4CY'23 from -2.5% in Q3CY'23.

However the SWIP growth in mechanical and equipment (7.8% weight), electrical and electronics (9.1% weight) are both expected to perform better in 2024. The former's growth is seen rising to 2.2% this year from a de-growth of -2.0% last year. The electrical and electronics segment is expected to record 4.1% growth in this period from a mere 0.8% increase last year. However, the fabricated metal products segment (with a weight of 11.4% among steel consuming sectors), is seen slowing to 2.1% this year against a more robust 6.3% seen last year.

As per another source, ASEAN is likely to see output in the manufacturing market growing to $2.1 trillion in 2024.

A CAGR of 1.87% is expected over 2024-2029.

Automotive sector may slow down: Automotive, which enjoys 7.8% weightage within the ASEAN steel consuming sectors, saw two years of very high total industry volume (TIV) growth in 2022 and 2023.

TIV rose 11% in 2023, a new all-time high, propelled by passenger cars sub-segments, amid a resilient domestic economy and stable socio-political environment. The stellar performance can be attributed to a number of factors. These include fulfilment of tax-free cars bookings (carried over the due of 31 March, 2023), stable socio-political environment, resilient domestic economy, new model launches, including EVs at very competitive prices, and an improved industry supply chain environment.

However, TIV is expected to drop -7.5% in 2024 due to uncertain geopolitical situations, lower global and national GDP predictions, and expected slowdown in consumer spending pattern globally.

Outlook

Looking beyond 2024, ASEAN SWIP may improve on the current year's levels. Construction sector demand is expected to accelerate to 5.5% from 5.1% in 2024 and mechanical equipment, to 4.4% from 2.2% this year. Automotive may remain flat y-o-y while fabricated metal products may slow down to 1.9% from 2024's 2.1%. Overall, SWIP growth may be marginal amid the global geo-political tensions and slowdown fears in major economies like the US and China.