According to the latest steel export numbers revealed by JISF (Japan Iron and Steel Federation), Thailand has emerged as the top importer of Japanese steel products in 2018 leaving behind South Korea and China which had been Japan’s largest two steel consumers over last two decades.
Thailand imported about 5.9 MnT of steel from Japan in 2018, up by 5.2% y-o-y basis whereas South Korea imported 5.4 MnT of steel from Japan down by 9.5% against 2017 and China imported 5.6 MnT of steel from Japan, a dip of 1% y-o-y basis.
Japan is the world’s second largest steel exporter after China and exported about 36.5 MnT of steel in 2018.
Thailand is the manufacturing base for many Japanese downstream manufacturers
Steel is Japan’s fourth-largest export item after automobiles, semiconductors and auto parts. The country has exported the highest quantity of steel to Thailand in 2018 as major Japanese makers of cars, home appliances and machinery have moved into Southeast Asia’s biggest production hub, Thailand.
Although usually construction accounts for the highest steel consuming sector in any country, Thailand has a distinctive steel consumption structure compared to other Southeast Asian nations, with automobiles, consumer electronics and machinery accounting for 19 %, 8.7 % and 6.6 % of all steel consumption, respectively, according to data of the South East Asia Iron and Steel Institute.
In the light of 1997 Asian financial crisis which led to significant currency depreciation of Thailand’s Bhat against U.S. Dollars, Japanese automakers relocated their production lines to Thailand as a market and a manufacturing and export hub for pickup trucks and later for small eco-friendly cars.
Major Japanese steel-makers such as Nippon Steel & Sumitomo Metal Corp. and JFE Steel Corp. only have blast furnaces in their home markets due to massive investment sizes, political and economic risks abroad and other reasons. But Japan’s two largest steel mills and Japanese trading houses have established a number of downstream processing bases in Southeast Asia, mainly in Thailand.
Japanese steel-makers have shipped crude steel to these countries and processed it there to meet demand for high-quality products from Japanese manufacturing affiliates operating in the region. Also, the Japan-Thailand Economic Partnership Agreement, which took effect in 2007, boosted steel shipments to Thailand by eliminating tariffs on such products in 2018.
According to JISF, Japan exported about 35% of its steel products to Southeast Asian countries amid robust demand. But for 2019, according to WSA (World Steel Association), the growth in global steel demand is likely to slow down to 1.4% against 3.9% in 2018 which means that Japanese steel makers may face weak demand amid slow demand growth in 2019.
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