Posted on 11 Oct 2019
Scrap demand in the Association of Southeast Asian Nations, or ASEAN, is expected to grow in 2019/2020 despite market concerns of overcapacity, as steel production and exports grew in 2018, led by Vietnam.
Data released by the South East Asian Iron and Steel Institute, or SEAISI, on Wednesday showed a 7% year on year rise in scrap demand at 28.6 million mt in 2018.
Among the ASEAN member countries, Vietnam took the lead with a 6.5% on the year rise to 9.4 million mt, which accounted for about 32.9% of overall demand. The country's scrap imports grew 15% to 5.07 million mt, offsetting a 4.5% fall in domestic supply to 4.4 million mt. Its 2018 scrap exports fell by more than half to 86,400 mt as local production rose.
In 2018, Vietnam became a leading finished steel producer in ASEAN with an output of 14.53 million mt in 2018, a 28.6% spike versus 11.30 million mt in 2017. Its 2018 exports rocketed 40.6% to 6.58 million mt against 4.68 million mt in 2017.
Vietnam's scrap requirements will grow in 2019 as local steelmaker, Hoa Phat Steel, which runs two blast furnaces in Hai Duong province, started up a third at its Dung Quat Steel mill, located in Quang Ngai province, in June 2019. The new BF is the first of four -- each with a 1,080 cubic meter production capacity able to make 1.2 million mt of hot metal yearly.
Demand from Thailand reached 7 million mt in 2018, a 5.6% fall from 2017 amid a 16.6% rise in scrap exports to 410,137 mt, SEAISI said. Scrap demand could fall in 2019 as domestic production slows. Thailand's steel production over January-June fell 3.93 million mt, down 13.3% year on year, data from the Iron and Steel Institute of Thailand showed, amid weaker domestic and overseas demand.
Next was Indonesia with 6.3 million mt scrap demand, a 19% spike from a year ago. Domestic supply of scrap hit 3.87 million mt, up 10.6% from 2017, while imports hiked 33.8% to 2.5 million mt over the same period. Scrap exports dipped 4% to 67,063 mt in 2018.
Malaysia posted 3.5 million mt in demand, up 18.6% from the previous year as domestic supply rose 500,000 mt to 2.96 million mt, while imported scrap reached 993,017 mt, up 17.7% from the year before.
The Philippines had 1.65 million mt of scrap demand, up 9.1% year on year. The country's local supply of scrap rose 19.5% to 2.15 million mt in 2018, while exports hit 500,000 mt.
Singapore needed 686,872 mt of scrap in 2018, a 4.2% year on year rise as domestic supplies rose 5.2% to 1.29 million mt, while imports were halved to 126,306 mt. The country's scrap exports fell 8% year on year to 726,153 mt.
Scrap demand in ASEAN is expected to grow in 2019 as steel consumption is forecast to exceed 84 million mt in 2019, about 5% higher year on year and by 6% in 2020, SEAISI had predicted, driven mostly by the construction sector.
In 2018, ASEAN consumed about 39.78 million mt of long steel and 40.36 million mt of flat steel, up 6.8% and 3.3%, respectively, SEAISI data showed.
A declining steel product market has, however, been a huge downward pressure against the growing scrap demand in Southeast Asia.
Despite new capacities arising from various blast furnaces commissioned in countries such as Vietnam, Indonesia and Malaysia this year, Southeast Asian mills were heard to have lowered scrap requirements as a whole due to weakening demand for steel products through most of 2019.
"Prices for Indonesian rebar were around $600/mt at the start of the year. Currently, it has fallen to around $80/mt and sales are still very slow," an Indonesian mill source said.
"Import volumes are still projected to increase slightly for 2019, but at a much slower pace than expected at the start of the year with all the blast furnaces being launched," a Vietnamese trader said, with reference to the Vietnamese market.
"The market is now facing the pains of overcapacity," the source said.
In 2018, ASEAN's production of hot-rolled finished steel products rose 15.3% year on year to 42.8 million mt, while imports grew at a slimmer 2.4% to 50.4 million mt, while exports shot up 33.1% to 13.4 million mt, SEAISI data showed.
"Long products industry is at an overcapacity in ASEAN. Over-investment will create severe competition leading to a fall in prices and profitability. There are still opportunities in the flat steel segment, but over-investment appears to be on the horizon," Yeoh Wee Jin, secretary-general designate of SEAISI, had said. "There is a potential for exports, but they could cause trade actions against 'circumvention'."
