Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN

Transcription

1 AEC and Thai Steel Industry 19 November

2 Contents Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN Steel Industry 1

3 The apparent steel use has increased on average 7.6 percent per year. It has a strong positive correlation with the economic growth Thailand apparent steel use ( 000 Tonnes) CAGR 10/00 (%) 16,000 14,000 12,000 10,000 10,049 10,967 12,661 13,876 12,154 12,716 13,581 10,758 14, % 8,000 6,000 8,031 5,960 6,762 7, % 5.3 % 4,000 3,837 2, % Production Import Export Apparent Use Source: Iron and Steel Institute of Thailand Economic recovery & growth Construction boom Economic slowdown Construction contracted Manufacturing growth Economic contracted Economic growth Construction recovery Manufacturing boom 2

4 Shortage of the supply. The local production is only 30 percent of the demand. Relying on import Thailand crude steel production and steel demand ( 000 Tonnes) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, ,877 14,012 10,758 3,837 5,161 5,565 4,145 1, E Steel Demand Crude Steel Production Source: Iron and Steel Institute of Thailand 3

5 Thailand Steel Industry Structure Ironmaking Steelmaking Finishing & Coating Forming End Users 1 Mill TATA (Mini- Blast Furnace) Scrap recycle 16 Mills TATA G Steel GJS SYS TRIUMP Etc. Production:4.2 m T Import:3.7 m T Export:0.2 mt Demand:7.7 m T Import Russia, Ukraine, Turkey, Brazil Export Vietnam, Philippines, India, Taiwan Source: Iron and Steel Institute of Thailand Long Product Hot-Rolling ~ 50 Mills TATA Sahaviriya Tycoon Etc. Production: 3.7 m T Import: 1.7 m T Export: 0.8 m T Demand: 4.7 m T Flat Products Cold-Drawing Hot-Rolling Cold-Rolling Coating 5 Mills G Steel GJ Steel Sahaviriya LPN Production: 3.9 m T Import: 3 m T Export :0.3m T Demand : 4.2 m T Import Japan, S. Korea, Australia, China Export Vietnam, Malaysia, Laos ~ 100 Mills 3 Mills SUS TCRSS Bluescope Production: 1.7 m T Import:0.7 m T Export: 0.1 m T Demand: 1.6 m T Import Japan, S. Korea, Taiwan, China Export China, India, Italy, Indonesia ~ 15 Mills Bluescope Thai Tin Plate Production: 0.8 m T Import: 2.2 m T Export: 0.1m T Demand: 2.9 m T Import Japan, S. Korea, Taiwan, China Export Vietnam, Laos, Myanmar, Hong Kong 1,000 Mills Machining Bending Cutting Welding Forging Heat Treatment Etc. Construction 54% Automobiles and parts 16% Machinery and Industrial Products 13% Electrical Appliances 12% Packaging 5% 4

6 Thailand relies on the Non-ASEAN countries on its import (2009) Thailand steel trade in 2009 (Million USD) Thailand Export Thailand Import HS 72 (iron and steel) HS 73 (articles of I and S) HS 72 HS 73 Value % Value % Value % Value % Brunei , Cambodia 40, , , Indonesia 73, , , , Lao PDR 68, , Malaysia 87, , , , Myanmar 53, , Philippines 26, , , , Singapore 55, , , , Vietnam 180, , , , ASEAN 586, , , , Non ASEAN 463, ,329, ,638, ,265, World 1,050, ,015, ,878, ,876, Source: WITS 5

7 Thailand is capable of producing commercial grade, but needs to import quality grade! Thailand steel import in 2010 (Tonnes) Products Capability to produce Volume in 2010 (Tonnes) Import Main countries Rebar x Very low - Bar Few amount 523,128 Japan, China, S. Korea, Taiwan Long products Cold Drawn Bar x 69,272 Japan, S Korea, India, Italy Wire Rod & Wire x 916,232 China, Japan, Taiwan, S. Korea, Brazil Hot-Rolled Section x 12,607 Japan, China, UK, S. Korea Seamless Pipe 196,623 China, Japan, Italy HRC & HRP x 1,923,815 Japan, S. Korea, China, Austraila, Taiwan HRC P&O Few amount 1,056,009 Japan, S. Korea CR Carbon Steel x 684,055 Japan, S. Korea, China, Taiwan Flat products CR Stainless Steel x 327,916 Japan, S. Korea, China, Taiwan Galvanized & Pre-Painted x 1,515,500 Japan, China, S. Korea, Taiwan Zn-Al & Pre-Painted x 123,948 China, Taiwan, S. Korea, Japan TP & TF x 253,177 China, S. Korea, Taiwan, Belgium, Netherlands Cold-Formed Steel Section & Pipe x 147,552 Italy, Japan, China, Taiwan, S. Korea 6

8 Some Evidences The demand for steel is positively related to the economic performance. Obvious! Construction shares more than half of total demand while automobiles, machineries, and electrical appliances share over ten percent Due to the shortage of supply, imports are mostly from non-asean countries; China, Japan, Korea, Australia, Taiwan, Russia, and eastern European countries. Local production for commercial grade, not quality grade Exporting some HS 72 (iron and steel) to ASEAN members Exports to non-asean countries with different destinations from one year to another 7

9 Contents Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN Steel Industry 8

10 Milestones of ASEAN INDONESIA Bangkok Declaration AFTA 40 th Anniversary of ASEAN Cebu The Philippines PHILIPPINES SINGAPORE Declaration of ASEAN Concord II Bali Indonesia ASEAN Community MALAYSIA THAILAND VIETNAM CAMBODIA BRUNEI DARUSSALAM MYANMAR LAOS 9

11 AEC Single market and production base (goods, services, capital, skilled workers, and investment) Competitive economic region (Competition policy, IPRs, tax harmonization, e-commerce, and basic infrastructure) Equitable economic development (CLMV) Integration with the global economy (ASEAN plus and plus plus and global production networking) 10

12 Overview of the ASEAN Economic Community characteristic AEC Single Market and Production base objective Free flow of goods services, investment, and skilled labor To create a stable, prosperous and highly competitive ASEAN economic region Freer flow of capital 11

13 Single market and production base 12

14 ATIGA (ASEAN Trade in Goods Agreement) Tariff Measures ASEAN zero tariff for 60% of IL 2007 zero tariff for 80% of IL 2010 zero tariff for 100% of IL CLMV 2003 VN with 0-5% for substantial items 2007 LS and MYR with 0-5% for substantial items 2010 CAM with 0-5% for substantial items 2015 zero tariff for 100% of IL IL = Inclusion list 13

15 ATIGA (ASEAN Trade in Goods Agreement) Non-Tariff Issues o Elimination of non tariff barriers Technical Barriers to Trade (Standard, testing procedure, ) Custom valuation. o Rule of Origin o Trade Facilitation 14

16 AEC and Potential sectors for Thailand Automotive & Parts* Electrical & Electronics* Food Production Hub (packing*) Tourism Hub Manufacturing & Assembly Hub* Machinery and Metalworking Production Base* Source: Thai Federation Industry 5/6 potential sectors involve steel industry 15

17 Comparison Thailand and its ASEAN Partners in steel industry Thailand o the largest steel market in region o capable of producing various steel products as compared to ASEAN partners due to the FDI and joint venture steel mills (Korea/Japan/india) Malaysia o strong in rebar, wire rod, wire, galvanized steel and steel pipe market Indonesia o strong in rebar, wire rod, hot-rolled coil and hot-rolled plate market o attract new investment from global steel players as huge market potential and its prosperous economy Singapore o strong in rebar and wire rod and strong steel trader in heavy section, seamless pipe and galvanized steel Vietnam o strong in rebar, cold-rolled coil and zincalume market o Booming steel market in Vietnam is expected after it survives the volatile economic period Philippines steel production serves local market, no role in export 16

18 Recalling the AEC: growth driven within ASEAN and attracted Non-ASEAN Single market and production base (goods, services, capital, skilled workers, and investment) Competitive economic region (Competition policy, IPRs, tax harmonization, e-commerce, and basic infrastructure) Equitable economic development (CLMV) Integration with the global economy (ASEAN plus and plus plus and global production networking) 17

19 Methodology Constructing the value chain from upstream to downstream of Thai Steel Industry base on HS 72 and 73 at 4-6 digits Scope of study on the Five Selected industries Policy gap analysis o o AEC factors affecting the supply and demand conditions Non-AEC factors (other than ASEAN) affecting demand and supply conditions Integrated five selected industries to evaluate the opportunity and threat of the Thai steel industry for each product item Grouping the iron and steel products and indicate the National strategies towards the AEC Identifying policy implications or what to be done at the ASEAN level 18

20 Figure 1: Supply chain of steel and automotive industry Ironmaking Steelmaking Finishing Downstream Industry Mini-Blast Furnace Billet production by EAF process Bar Carbon, Alloy Cold Drawn Bar Carbon, Alloy Crank shaft Scrap Wire Rod Carbon, Alloy Steel Wire - Carbon, Alloy Wire Products - Carbon, Alloy Fastener, Tire Cord Slab production by EAF process HRC for Direct Use Carbon, Alloy HRC P&O) Carbon, Alloy Chassis, Wheel rim, Wheel rib Welded Pipe Carbon, Alloy Shock absorber HRC for Cold Rolling CRC Bumper, Seat Layer 1: Supply Chain Galvanneal Outer Body Hot-Rolled Stainless Steel Sheet Cold-Rolled Stainless Steel Sheet Exhaust Pipe, Decorative Item 19

21 Figure 2: Factors from AEC to auto-related steel industry Supply Factors Ironmaking Steelmaking Finishing Demand Factor อ ตสาหกรรมยานยนต Downstream Industry Mini-Blast Furnace Scrap Billet production by EAF process Slab production by EAF process Bar Carbon, Alloy ASEAN producers can t do this product, need to import from outside ASEAN Wire Rod Carbon, Alloy ASEAN producers can t do this product, need to import from outside ASEAN HRC for Direct Use Carbon, Alloy ASEAN producers can t do this product, need to import from outside ASEAN HRC for Cold Rolling ASEAN producers can t do this product, need to import from outside ASEAN Steel Wire - Carbon, Alloy Cold Drawn Bar Carbon, Alloy Local producer capable to produce this product (most are Japan JV company) Wire Products - Carbon, Alloy HRC P&O - Carbon ASEAN producers can t do this product, need to import from outside ASEAN Welded Pipe - Carbon CRC Thai producers are so strong, but more treats from Vietnam in the near future - Tax level in each country is the main non-tariff measures + Trade Facilitation for import and export automobile and parts will cut more costs + Each country in ASEAN will buy more automobile after AEC that induce more production and trade level Layer 2: AEC Factors Process which Thai producer can not produce or capable with limited grade and very small amount Process which Thai producer capable to do Galvannised Steel Sheet ASEAN producers can t do this product, need to import from outside ASEAN Hot-Rolled Stainless Steel Sheet ASEAN producers can t do this product, need to import from outside ASEAN Cold-Rolled Stainless Steel Sheet Thai producers capable in popular grades. Vietnam and Malaysia will come out in the near future Impact for each company depends heavily on policy from headquarter (outside ASEAN) 20

22 Figure 3: Factors from AEC Plus to auto-related steel industry Supply Factor Demand Factor Ironmaking Steelmaking Finishing Downstream Industry Mini-Blast Furnace Scrap Billet production by EAF process Slab production by EAF process Bar Carbon, Alloy Import from Japan, Korea, Taiwan. Gradually increase of import from China and India Wire Rod Carbon, Alloy Import from Japan and Korea HRC for Direct Use Carbon, Alloy Import from Japan, Korea, Taiw an HRC for Cold Rolling Import from Japan, Korea, Taiwan Steel Wire - Carbon, Alloy Local producer capable to produce this product (most are Japan JV company) Cold Drawn Bar Carbon, Alloy Local producer capable to produce this product (most are Japan JV company) Wire Products - Carbon, Alloy Local producer capable to produce this product (most are Japan JV company) HRC P&O Carbon, Alloy Import from Japan, Korea, Taiw an Welded Pipe - Carbon Local producer capable to produce this product (most are Japan JV company) CRC Korean and Taiw anese steel company invests in Vietnam Impact from AJCEP Japan is still major investor in this region by focusing on Thai, Indonesia and Philippines and will expand more in the future, especially after Tsunami. Car and truck import will expand continually from ASEAN Plus FTAs Layer 3: External Factors Process which Thai producer can not produce or capable with limited grade and very small amount Process which Thai producer capable to do Hot-Rolled Stainless Steel Sheet Import from Korea, Japan, S. Africa and Europe Galv annised Steel Sheet Import from Japan and Korea. More investment project will ask for approve. Now there are new investment from Japan to Thai Cold-Rolled Stainless Steel Sheet Korean steel company has invested in Vietnam and JV between Japan and EU companies will go to Malaysia Japan set Thai for their be production base in automotive sector for export, especially under FTAs e.g. Thai and ASEAN, and with India, Australia 21

23 Contents Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN Steel Industry 22

24 Implications on the selected downstream industries: Thailand Automobiles ASEAN countries demand more automobiles as the AEC that induces more production and trade level Thailand is center of ASEAN production hub for automobiles New investment from big auto assembly companies also eye on Thailand and Indonesia (even with the flooded situation) Most of steel products are imported mainly from Japan and South Korea (quality and security of supply chain) Electrical Appliances Thailand is center of ASEAN production hub in Air-conditioner, Refrigerator, Washing machine and HHD (60% of global production, but gone with the flood for the time-being) Malaysia is center of ASEAN production hub in LCD, and LED South Korea has invested significantly in ASEAN in the past few years while Japan has been investing since 1980s ASEAN steel producers can serve in some products, while imported quality steel products mainly come from Japan and South Korea 23

25 Implications on the selected downstream industries: Thailand Machinery Fossil and renewable energy boom have driven new investment in oil & gas and petrochemical plants New regulation for double hull ship will drive steel plate demand A lot of new investments from global construction and agricultural machinery assembly companies will allow Thailand to be the hub Most of steel quality grades are imported Canned food Thailand is center of world food factory Canned food output has been grown up slightly but limited by seasonal factor of materials such as fruits and seafoods Mechanization of agricultural process will increase more output in canned food All ASEAN tin-plate and tin-free steel producers are Japan-joint venture firms 24

26 Implications on the selected downstream industries Thailand Construction Largest steel consuming sector in every ASEAN country Great opportunity from the ASEAN connectivity project Still to be liberalize to foreign investment except Singapore Most of steel usage can supply by local producers Every country set its own mandatory standard in steel for construction 25

27 Opportunity Threat Potential of steel demand growth from new investment in construction and manufacturing sectors Rising steel demand in Cambodia, Laos and Myanmar which nearby Thailand Relocation of Japan automotive to Thailand Potential to produce higher value steel to replace imports with JV of non-asean countries Non-Tariff measures among ASEAN members (standard) Higher cost from new regulations in environment and energy usage Rising of steel and steel products import from China (commercial grades) 26

28 Strategy 1: Improve the Potential of High-Grade Production that are currently imported (import substitution) Strategy 2: Strengthen Potential Producers Strategy 3: Fulfill the Missing Gap in the Supply Chain Strategy 4: Establish an immunity for Domestic Producers 27

29 Strategy 1: Improve the Potential of High-Grade Production that are currently imported (import substitution) Product group All downstream steel products which have not yet produced in Thailand as a result of an inadequate technology Product type Long product: Seamless Pipe Flat product: Electrical Steel Sheet, Hot-Dip Galvanized Steel Sheet Zero Spangle, Hot-Dip Galvanized Steel Sheet Galvanneal, Hot-Dip Galvanized Steel Sheet Galfan, and Hot-Dip Galvanized Steel Sheet HRC Based and Color & Plastic Coated Steel Sheet Strategy Government should not only allow an import but also lower barriers as well as facilitate the import from ASEAN members. To encourage domestic investment in the Iron and Steel Industry and establish a production network among ASEAN members 28

30 Strategy 2: Strengthen Potential Producers Product group Potential products which are currently exporting to ASEAN market. Product type Long product: include Rebar, Hot-Rolled Small Steel Section, Hot-Rolled Heavy Steel Section, Cold Drawn Bar, Steel Wire Flat product: Hot-Rolled Steel Sheet for Direct Use, Cold-Rolled Steel Sheet GIS, Hot-Dip Galvanized Normal Spangle & Pre - Painted, Galvalume Steel Sheet & Pre Painted and Welded Carbon Steel Pipe Strategy Facilitating aforementioned products to export and fully utilize benefit from the ASEAN Economic Community. Encouraging a creation of trade and distribution network and supporting joint venture. As a result, we could better expand and access the ASEAN market. 29

31 Strategy 3: Fulfill the Missing Gap in the Supply Chain Product group Steel products at the upstream of the long supply chain; these products could not produce domestically or we could produce only a limit amount of commercial-grade products as we could not secure enough supply of high quality raw materials Product type Long product: Bar, Wire Rod Flat product: Hot-Rolled Steel Sheet P&O, Hot-Rolled Steel Sheet for Subseqence Cold Rolling, Hot-Rolled Steel Plate and Hot-Rolled Stainless Steel Sheet & Plate Strategy The government should promote an investment in the upstream industry (Ironmaking) in Thailand. Establishment of raw material network, trade and distribution network, and cooperation mechanism among steel producers and related industries 30

32 Strategy 4: Establish an immunity for Domestic Producers Product group Products which suffered from the loss of competitiveness due to high costs or import competing products Most of these products have been imported from ASEAN major dialogue partners especially the People s Republic of China which is the major producer who is suffering from overcapacity problem. ASEAN members are currently involving in new investment projects; consequently, these countries are likely to be our competitors in the year to come especially when we will be fully integrated in Product type Long product: Rebar, Steel Wire, Wire Product Flat product: Hot-Rolled Steel Sheet for Direct Use, Hot-Dip Galvanized Normal Spangle & Pre - Painted, Galvalume Steel Sheet & Pre Painted, Electro-Galvanized Steel Sheet, Tin Plated Steel Sheet, Tin-Free Steel Sheet, Cold Rolled Stainless Steel Sheet and Welded Stainless Steel Pipe Strategy Strengthening producers in this group of products so that they could lower their costs and improve their production processes which would eventually help them compete and export to the ASEAN market. 31

33 Contents Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN Steel Industry 32

34 ASEAN external economics relations ASEAN-EU ASEAN-China FTA ASEAN-Korea FTA ASEAN-Japan CEP AEC ASEAN-India FTA ASEAN-Australia- New Zealand FTA 33

35 Implications to the ASEAN Steel Industry Private sector roles Steel trade center/network ASEAN Joint Venture Firm ASEAN Holding Firm Government roles Rule of Origin (ROO) Mutual Recognition Agreement Trade Facilitation New investment in high grade steel product Preparation for new trade regulations Steel association/institute can play roles in Cooperation with private sector and government to create solid and fast action Data center in trade statistics, trade regulations, and insightful market information 34

36 Implications to the ASEAN Steel Industry ASEAN plus three and ASEAN plus six ASEAN is a channel to access to high potential markets like China and India ASEAN centrality for the East Asia Enhancement cooperation of ASEAN members is the key to sustain the ASEAN steel industry under competition from global steel companies 35