The Southeast Asian steel industry is poised for a significant increase in production capacity with the upcoming launch of several new hot-rolling mills. These facilities, located in Indonesia, Malaysia, and Vietnam, are expected to collectively add 10 million tonnes (mnt) of annual production by the end of 2024. This surge in capacity raises concerns about intensifying competition in the region, particularly for Japanese steel exporters who currently hold a dominant market share.
Indonesia:
Tokushin Steel, a Chinese-operated integrated steel mill in Indonesia, is scheduled to launch a new hot-rolling mill with a 4 mnt annual capacity in June 2024. This expansion will allow the company to enter the hot coil market, potentially exporting half of its production.
Malaysia:
Eastern Steel Co., Ltd., a subsidiary of China’s Jianlong Steel, is set to begin operations of a 2.6 mnt hot-rolling mill in September 2024. This development is expected to make Malaysia self-sufficient in materials for ERW steel pipes and potentially lead to increased exports due to its strategic location.
Vietnam:
Hoa Phat, a major Vietnamese steel producer, is expanding its Dung Quat steel mill with a 5.5 mnt hot-rolling mill slated for completion by December 2024. This addition will significantly increase the company’s hot coil production capacity and allow them to compete in new product segments.
Market concerns:
The substantial rise in production capacity comes at a time when regional steel demand remains stagnant. The Southeast Asian Steel Association (SEAISI) reports a 2% y-o-y decline in apparent steel consumption for 2023, failing to recover to pre-pandemic levels. This raises concerns about potential oversupply and price pressures in the coming months.
Impact on Japanese exporters:
Japan currently holds a significant share of hot coil exports to ASEAN, accounting for nearly 30% of the market. The influx of new production capacity from within the region could threaten this position and force Japanese exporters to adapt their strategies.
Outlook: The upcoming launch of these new hot-rolling mills will undoubtedly reshape the competitive landscape of the Southeast Asian steel market. The ability of regional producers to navigate this new environment and potentially capture market share from established players will be a key story to watch in the coming months.
Note: This article has been written in accordance with an article exchange agreement between Japan Metal daily and BigMint.