Source: SEAISI
When analysts say that China will not become a major steel exporter –at least in a short run- steel producers in South East Asia would have a different opinion. The region has been flooded by cheap semifinished and finished products from China. Last year China's export to Indonesia jumped by a staggering 374% to almost 1.7 million tons. Philippines and Thailand also imported 80% more steel from China compared to 2004. While the cheap steel is an opportunity for some, it is a big threat for others.
Malaysian long product producers suffered because of squeezed profit margin as they had to compete with cheap billets and bars from China (The Edge, 8 May 2006). Malaysian producers tried to escape by increasing exports with little success. Indonesia goes further by submitting anti-dumping petition against China's hot rolled sheet. Krakatau Steel just could not bear to compete domestically when last year China dumped 123 thousand tons of HRC, an increase from 55 thousand tons in 2004 (Steel Business Briefing, 8 June 2006). The Indonesian market has been flooded with what consumers call 'baby coil', the narrow-width hot rolled coil. The hot rolled coils fit for pipe, C-channel, and other construction uses.
Thailand also suffered with the surging imports from China as the protection of anti-dumping duty does not cover China's HRC product. There had been big jumps in import of HR, CR, and galvanized sheet from China. Steel Business Briefing reported that Chinese hot rolled coils and plate imports were 288 thousand tons during January-August 2005 compared to 54 thousand tons in January-August 2004. Cold rolled sheet imports from China jumped to 56 thousand tons from 11 thousand tons in the same period of time. Thailand's steel producers are now contemplating on whether they will file an antidumping petition against Chinese products.
Imported Steel Products from China
|
|
2004 |
2005 |
Increase (%) |
|
|
|
Indonesia |
350 |
1658 |
374% |
|
|
Thailand |
1444 |
2601 |
80% |
|
|
Philippines |
321 |
575 |
79% |
|
|
Singapore |
688 |
766 |
11% |
|
(Source: SEAISI Statistics) in '000 tons
Therefore, China's product is a big threat for integrated producers (i.e plants who have steelmaking and rolling), but it is an opportunity for others. China as a source of semifinished products (e.g. billets) is an opportunity for rebar/wire rod rollers. As no or very low import duty imposed for billets, the bar and wire rod mill can utilise cheap raw material and make decent profits. But the story would be different if they also have to compete with China's finished products in the market.
Downstream processors such as pipemakers, wire mesh, precages, would benefit from low-cost raw materials. In fact NatSteel of Singapore, according to Mr Narendran (Deputy President-Operation), has been moving away from selling rebars and wire rods and focuses on producing more value added products.
To summarise, China's export to the region has been a big threat for integrated mills. To a lesser extent – as usually import duty is higher for finished product – it is also threatening hot rolling mills both flat and long. The beneficiaries of the imported Chinese steel are the downstream processors; however, due to low quality of the steel, the end uses are limited. South East Asian steel producers have very limited choices to cope with Chinese products as there is no way that they can compete openly. They can ask their governments to protect them by imposing higher import duty (or anti-dumping duty), export more, shift to higher grade segments, or move to downstream products.
