2011 AEC and Thai Steel Industry 0 Contents Current Steel Industry Situation Consequences from the ASEAN Economic Community Implications on Thailand and recommendation Implications to the ASEAN ID: 602060
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Slide1
19 November
2011
AEC and Thai Steel Industry
0Slide2
Contents
Current Steel Industry SituationConsequences from the ASEAN Economic CommunityImplications on Thailand and recommendationImplications to the ASEAN Steel Industry1Slide3
The apparent steel use has increased on average 7.6 percent per year.
It has a strong positive correlation with the economic growth
2Thailand apparent steel use (‘000 Tonnes)
CAGR 10/00 (%)
7.6 %
5.3 %
7.6 %
-0.1 %
Economic recovery & growth
Construction boom
Economic slowdown
Construction contracted
Manufacturing growth
Economic growth
Construction recovery
Manufacturing boom
Economic contracted
Source:
Iron and Steel Institute of ThailandSlide4
Shortage of the supply. The local production is only 30 percent of the demand. Relying on import
3
Source:
Iron and Steel Institute of Thailand
Thailand crude steel production and steel demand (‘000
Tonnes
)Slide5
4
Thailand Steel Industry Structure
IronmakingSteelmakingFinishing & Coating
End Users
Scrap recycle
Hot-Rolling
Hot-Rolling
Cold-Rolling
Coating
Construction
54%
Automobiles and parts
16%
Machinery and Industrial Products
13%
Electrical Appliances
12%
Packaging
5%
Cold-Drawing
Forming
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
Long Product
Flat Products
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
~ 50
Mills
TATA
Sahaviriya
TycoonEtc.Production: 3.7 m TImport: 1.7 m TExport: 0.8 m TDemand: 4.7 m T
~ 100 Mills
1,000 MillsMachiningBendingCuttingWeldingForgingHeat TreatmentEtc.
1 MillTATA (Mini-Blast Furnace)
Source:
Iron and Steel Institute of Thailand
5
Mills
G Steel
GJ Steel
SahaviriyaLPNProduction: 3.9 m TImport: 3 m TExport :0.3m TDemand : 4.2 m TImportJapan, S. Korea, Australia, ChinaExportVietnam, Malaysia, Laos
~
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 KongSlide6
Thailand relies on the Non-ASEAN countries on its import (2009)
5
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
6.38
0.00
793.48
0.02
2,714.25
0.04
14.21
0.00
Cambodia
40,399.62
3.85
30,512.50
0.76
6,616.79
0.10
184.91
0.00
Indonesia
73,718.75
7.02
129,143.29
3.22
11,496.90
0.17
53,212.92
1.37
Lao PDR
68,424.95
6.51
47,662.68
1.19
318.27
0.00
214.28
0.01
Malaysia
87,708.63
8.35
125,268.99
3.12
109,273.05
1.59
255,214.586.58Myanmar
53,406.88
5.08
24,843.720.6278.290.00466.120.01Philippines26,680.292.5458,046.00
1.4518,101.810.2629,539.820.76Singapore55,928.44
5.32160,714.90
4.0071,967.471.05254,174.646.56Vietnam
180,535.9317.19109,145.29
2.7219,962.320.29
17,486.650.45
ASEAN586,809.8555.86
686,130.8517.09240,529.14
3.50610,508.1215.75
Non ASEAN463,637.4244.14
3,329,296.3782.916,638,215.7796.503,265,939.8184.25World1,050,447.28100.004,015,427.21100.00
6,878,744.91
100.00
3,876,447.93
100.00
Thailand steel trade in 2009 (Million USD)
Source:
WITSSlide7
Thailand is capable of producing commercial grade, but needs to import quality grade!
6
Thailand steel import in 2010 (Tonnes)Slide8
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 percentDue 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 gradeExporting some HS 72 (iron and steel) to ASEAN membersExports to non-ASEAN countries with different destinations from one year to another
7Slide9
Contents
Current Steel Industry SituationConsequences from the ASEAN Economic CommunityImplications on Thailand and recommendationImplications to the ASEAN Steel Industry8Slide10
1967
1997
Milestones of ASEAN
1984
1995
1999
Declaration of ASEAN Concord II
Bali
Indonesia
2
003
2
007
40
th
Anniversary
of ASEAN
Cebu
The Philippines
MYANMAR
BRUNEI DARUSSALAM
2
015
ASEAN Community
AFTA
1992
Bangkok
Declaration
9
LAOS
INDONESIA
MALAYSIA
PHILIPPINES
SINGAPORE
THAILAND
VIETNAM
CAMBODIASlide11
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)
10Slide12
11
AEC
Single Market andProduction base
To create a stable, prosperous and highly competitive ASEAN economic region
Freer flow of capital
Free flow of goods
services, investment,
and skilled labor
characteristic
objective
Overview of the ASEAN Economic CommunitySlide13
12
Single market and production baseSlide14
ATIGA (ASEAN Trade in Goods Agreement)
Tariff Measures13
ASEAN 62003
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 Slide15
ATIGA (ASEAN Trade in Goods Agreement)
Non-Tariff IssuesElimination of non tariff barriers Technical Barriers to Trade (Standard, testing procedure, …
)Custom valuation ….Rule of OriginTrade Facilitation
14Slide16
15
AEC and Potential sectors for Thailand
Source: Thai Federation Industry5/6 potential sectors involve steel industrySlide17
Comparison Thailand and its ASEAN Partners in steel industry
Thailandthe largest steel market in regioncapable of producing various steel products as compared to ASEAN partners due to the FDI and joint venture steel mills (Korea/Japan/india
) Malaysiastrong in rebar, wire rod, wire, galvanized steel and steel pipe marketIndonesia strong in rebar, wire rod, hot-rolled coil and hot-rolled plate marketattract new investment from global steel players as huge market potential and its prosperous economy
Singapore strong
in rebar and wire rod and strong steel trader in heavy section, seamless pipe and galvanized steel
Vietnam
strong in rebar, cold-rolled coil and
zincalume
market
Booming steel market in Vietnam is expected after it survives the volatile economic period
Philippines
steel production serves local market, no role in export
16Slide18
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)
17Slide19
Methodology
Constructing the value chain from upstream to downstream of Thai Steel Industry base on HS 72 and 73 at 4-6 digitsScope of study on the Five Selected industries Policy gap analysisAEC factors affecting the supply and demand conditions Non-AEC factors (other than ASEAN) affecting demand and supply conditionsIntegrated 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 AECIdentifying policy implications or what to be done at the ASEAN level 18Slide20
19
Figure 1
: Supply chain
of steel and automotive industrySlide21
Figure 2
: Factors from AEC to auto-related steel industry
20Slide22
Figure 3
: Factors from AEC Plus to auto-related steel industry
21Slide23
Contents
Current Steel Industry SituationConsequences from the ASEAN Economic CommunityImplications on Thailand and recommendationImplications to the ASEAN Steel Industry22Slide24
23
Implications on the selected downstream industries: Thailand
AutomobilesASEAN countries demand more automobiles as the AEC that induces more production and trade levelThailand 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 Slide25
24
Implications on the selected downstream industries: Thailand
MachineryFossil 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 firmsSlide26
25
Implications on the selected downstream industries Thailand
ConstructionLargest 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 constructionSlide27
AEC: Opportunity and threat for Thai steel industry
26
OpportunityPotential of steel demand growth from new investment in construction and manufacturing sectors
Rising steel demand in Cambodia, Laos and Myanmar which nearby ThailandRelocation of Japan automotive to Thailand
Potential to produce higher value steel to replace imports with JV of non-ASEAN countries
Threat
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)Slide28
Strategies for Thai Iron and Steel Industry
under the ASEAN Economic Community
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
G
ap in the Supply Chain
Strategy 4: Establish “an immunity” for Domestic Producers
27Slide29
Strategy 1
: Improve the Potential of High-Grade Production that are currently imported (import substitution) 28
Product groupAll downstream steel products which have not yet produced in Thailand as a result of an inadequate technologyProduct typeLong 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 membersSlide30
Strategy 2:
Strengthen Potential Producers 29
Product groupPotential products which are currently exporting to ASEAN market.Product typeLong 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.Slide31
Strategy 3: Fulfill the Missing Gap in the Supply Chain
30Product 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 materialsProduct typeLong 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 industriesSlide32
Strategy 4: Establish “an immunity” for Domestic Producers
31Product group
Products which suffered from the loss of competitiveness due to high costs or import competing productsMost 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 2015.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.Slide33
Contents
Current Steel Industry SituationConsequences from the ASEAN Economic CommunityImplications on Thailand and recommendationImplications to the ASEAN Steel Industry32Slide34
33
ASEAN-Korea FTA
ASEAN-Japan CEP
ASEAN-EU
ASEAN-India FTA
ASEAN-China FTA
ASEAN-Australia- New Zealand FTA
ASEAN external economics relations
AECSlide35
34
Implications to the ASEAN Steel IndustrySteel trade center/network
ASEAN Joint Venture FirmASEAN Holding FirmPrivate sector roles
Rule of Origin (ROO)Mutual Recognition Agreement
Trade Facilitation
New investment in high grade steel product
Preparation for new trade regulations
Government roles
Cooperation with private sector and government to create solid and fast action
Data center in trade statistics, trade regulations, and insightful market information
Steel association/institute can play roles inSlide36
35
Implications to the ASEAN Steel IndustryASEAN plus three and ASEAN plus six
ASEAN is a channel to access to high potential markets like China and IndiaASEAN centrality for the East AsiaEnhancement cooperation of ASEAN members is the key to sustain the ASEAN steel industry under competition from global steel companies