In the recent Bangkok Steel Conference, the ASEAN Iron and Steel Industry Federation (AISIF) President Mr Wellington Y Tong presented a comprehensive paper on the region's latest steel industry update.  The paper discusses the current status and dynamics of the region's steel industry.  More importantly, it identified some critical issues to be dealt by the region's steel industry.  This article summarises the paper and highlights its most interesting parts.

South East Asia steel consumption has been growing continuously after the 1997 crisis.  However, its steel producers are lagging behind in terms of capacities and productivity.  ASEAN is the second largest net import region with 15.3 million tons of steel net imported in 2004 (USA is no.1 with 25.7 millions).  The region's net import of steel products has increased substantially, mostly by increasing imports of Thailand and Vietnam.  In the period of 1999-2005, Thailand and Vietnam had been growing at an annual rate of 32% and 21% respectively. 

However, there are only two countries in ASEAN have ironmaking facilities, Indonesia and Malaysia.  Krakatau Steel of Indonesia has 2.3 mtpy capacity and Malaysia has Perwaja with 1.2 mtpy and Amsteel with 0.75 mtpy.  All of the ironmaking facilities are using gas-based direct reduction technology. The ironmaking facilities supplied only 18% of iron unit for crude steel production in the region.

The production of semi-finished steel has been increasing annually at a steady 10% rate (CAGR 99-05) but imports has been increasing as well.  More than 11 million tons of semi-finished products are imported last year as ASEAN producers are not capable to supply billets and slabs for the region's demand.  Only Indonesia, Thailand, and Malaysia have slab production facilities with a total of 7.3 mtpy.  Semifinished steel production in the region is 100% from EAF route.  As local raw materials (scrap, sponge iron, HBI) are not sufficient, the producers import around 7-8 million tons of scrap per year.  Moreover, ASEAN countries imported 16.21 million tons of flat products and 3.44 million tons of long products in 2005.

The region's steel demand has been growing moderately.  It is forecasted to reach 56 million tons in 2010 and 72 million tons in 2020 from 41 million last year.  Construction sector is the largest steel consuming segment in ASEAN countries.  Its market share is 81% in Philippines, 73% in Malaysia, 66% in Indonesia, and 60% in Thailand.  Automotive segment is the second largest in Thailand (12%), Indonesia (11%) and  Malaysia (8%).  Other emerging markets are appliance, packaging, and shipbuilding industries. 

Mr Tong has identified key strategic issues facing the region's steel community.  When addressing the issues, he proposed that the industry to be proactive in positioning itself in the future.

The first issue is the heterogeneous character of the industry Among the ASEAN countries. The structure of the industry and the pattern of industry development vary across the region.  This may lead to difficulties in establishing a common position shared by all countries.

The second issue is varying status and patterns of economic development influencing steel demand and production. They have also different level of economic development, infrastructure, and industry support capabilities.  Additionally, the third issue is related to logistic problems and fragmented market because of geographical nature and disintegrated transport system of the region.

The are also external issues to be thought of:  China issue and global consolidation trend. How vulnerable are the ASEAN countries to Chinese exports? In light of Chinese expansion and the ASEAN-China FTA, the region has to identify what areas of activity will suit the ASEAN region best, as a whole and with regard to each individual country. 

Furthermore, ASEAN steel companies have entered the global re-alignment picture in the wake of company ownership changes.  Major steel mills have consolidated in order to expand capacity, to secure supply of raw material, and to capture a bigger share of global demand.  Can the ASEAN companies take advantage of these consolidations? 

Finally, Mr Tong proposed that ASEAN producers have to look for a possible role to play in the global supply chain by forming alliances with global players.  There are also rooms for active collaboration among ASEAN steel companies in the present situation.  The region's steel industry should also not to forget that continuous improvement in quality and efficiency is a must to maintain competitiveness in both high quality and commodity markets.