Yeoh Wee Jin 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 Developments a presentation at: 2021 Steel Committee Meeting, OECD 19 March 2021
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ASEAN Steel Industry: Steel Market DevelopmentsSteel Market Developments a presentation at: 2021 Steel Committee Meeting, OECD 19 March 2021 About the South East Asia Iron & Steel
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Yeoh Wee JinSecretary General
South East Asia Iron and Steel Institute
Singapore ▪ Malaysia ▪ Indonesia ▪ Myanmar ▪ Philippines ▪ Thailand ▪ Vietnam | Australia ▪ South Korea ▪ Taiwan
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)
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
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
Indonesia Malaysia Philippines Singapore Thailand Vietnam
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
Source: Various ASEAN country statistics
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 )
Source: Various ASEAN country statistics
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
Indonesia Malaysia Philippines Singapore Thailand Vietnam
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%
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
❑ ASEAN Economies amid COVID19
❑ Impact on the ASEAN Steel Industry
❑ The Investment Scenario
❑ Current & Emerging Policies & Trends
❑ 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
• 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
❑ ASEAN Economies amid COVID19
❑ Impact on the ASEAN Steel Industry
❑ The Investment Scenario
❑ Current & Emerging Policies & Trends
❑ 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