Will Chinese Mills Increase Steel Exports to SE Asian Nations ?

According to a report on June 24, in the past four years, Chinese steel companies have invested in a new steel project with an annual output of 32 MnT in Indonesia and Malaysia, which is equivalent to more than 40% of the steel consumption of the 10 member countries of the Association of Southeast Asian Nations in 2016.

China`s plan on reduction of domestic capacity is steadily underway, and it will be a good alternative to export steel products to Southeast Asian markets given that the export to the United States is limited. In Indonesia, China Qingshan Holding Group has invested in the expansion of low-quality nickel smelting facilities with an annual output of 1.5 MnT. In Malaysia, Hebei Dongshan Group and China Metallurgical Overseas Engineering Co., Ltd. are cooperating to build a coking coal and cement plant next to a new USD 3 billion steel plant.

If China`s steel industry wants to maintain steady exports and offset the impact of the US market, it is necessary to grasp the entire Southeast Asian market. As the continuous adjustment of the global industrial chain, the economical human resources in Southeast Asia have attracted a large amount of investment, which has led to the rapid development of manufacturing and processing industries in the region, driving the demand for steel to grow. The demand for steel in the 10 ASEAN countries in 2017 is as high as 70 MnT and it is expected to grow to 80 MnT in 2018.

According to the World Steel Association statistics, Thailand imported 12.6 MnT of steel in 2017, becoming the world`s second largest net importer of steel after the United States while Vietnam`s net import of steel is 12.3 MnT, ranking third in the world; If add up the Philippines and Malaysia markets,the net import of steel in the above five Southeast Asian countries reached 46.9 MnT in 2017. This is a reflection of the imbalance of steel supply and demand in the Southeast Asia region.

However, China`s export of steel products to Southeast Asia is not always smooth. The cheap steel from China will first compete directly with local steel companies in Southeast Asia and will also face the impact of traditional Japanese and Korean exporters. But one thing can benefit is China’s experience in technology, production, planning and construction in the steel industry as a “sought after resource” in the Southeast Asian steel market. We can take the advantage of “Chinese experience” as an add-on to compete with the Southeast Asian market and form complementary relation with local markets to realise increased steel exports.