The ASEAN Steel Industry Situation - OECD

1 The ASEAN Steel Industry SituationPresentation at: Steel Committee MeetingOrganisationfor Economic Co-operation and Development19 March 2020 YeohWee JinSecretary GeneralSouth East Asia Iron and Steel InstituteStatistical Yearbook Steel Quarterly Journal Member Directory Map of ASEAN Steel Industry Monthly NewsletterSEAISI organizes a major international conference & exhibition and a forum every year. The SEAISI Conference & Exhibition is the one of the largest events on the iron & Steel Industry in become a world-class Steel institute to contribute to sustainable Steel value chain in ASEANMISSION:To educate and advocate sustainable development of ASEAN Steel value chain, in partnership with global institution and experts~900 members with >400,000 employees 27 since 197102 Direction01 MembersThe ASEAN Steel Industry ASEAN Economies ASEAN Steel Consumption ASEAN Steel Demand (Sectors) ASEAN Steel Production & Trade Apparent Steel Consumption Forecast3 OUTLINE:PART AA Focus on New Steel Investments in ASEAN .

2 Past Events Impacts ASEAN Industry Situation Rise of the Integrated Megamills A Future Scenario PART BWhat s Next? Conclusions What s Next?PART C ASEAN Economies ASEAN Steel Consumption ASEAN Steel Demand (Sectors) ASEAN Steel Production & Trade Apparent Steel Consumption Forecast4 OUTLINE:PARTAS ource : IMF World Economic Outlook updated April 2019,World IMF, in its latest World Economic Outlook, cut its global growth forecast for 2019 to before picking up to in 2020 mainly on account of a number of global issues such as trade tensions and GDP growth forecast for ASEAN -5 maintained at in 2019 and in 2020 Source : Government s announcements and other sources5 ASEAN ECONOMIC PERFORMANCEASEAN is among the fastest growing regions in the world, with the ASEAN 5 nations expecting positive growth in the near future 5 GDP Growth012345678 IndiaChinaASEAN-5 WorldCISA dvancedEconomiesAverage GDP Growth in %, 2019 ASEAN Economies ASEAN Steel Consumption ASEAN Steel Demand (Sectors) ASEAN Steel Production & Trade Apparent Steel Consumption Forecast6 OUTLINE:PARTA - 10 20 30 40 50 60 70 80 907 APPARENT Steel CONSUMPTION IN ASEANASEAN-6 s apparent Steel consumption reached 80 m MT in 2018.

3 Consumption growth is high, with Vietnam, Thailand consuming more than 50% of ASEAN steelSource: SEAISI statisticsASEAN-6 CAGR m MTASEAN Apparent Steel Consumption 2000-2018 (million MT)ThailandCAGR: : 28%TH 24%ID 19%PH, 13%MY 12%SG 4% m MT0102030405060708090 ConsumptionProductionNet ImportsApparent Steel Consumption, Steel Production&Net Imports 2000-2018 (million MT)8 APPARENT Steel CONSUMPTION IN ASEANA bout half of ASEAN -6 s Steel consumption is supplied by imports; Forecast for 2019 is 83 m MTSource: SEAISI statisticsASC CAGR m m CONSUMPTION OF Steel (FLATS/LONGS)9 Demand for long Steel products is mostly served by local production while demand for flat products is mostly served by importsLong Products (2018) Consumption: m MT Production: m MT Net Imports: m MT Production growth follows consumption growth 2019 Forecast: m MTFlat Products (2018) Consumption: m MT Production: m MT Net Imports: m MT Market is mostly served by imports Forecast for 2019 is 43 m MT01020304050 Long Products Consumption for ASEAN 6m MTProduction -CAGR Imports-CAGR.

4 SEAISI statistics01020304050 Flat Products Consumption for ASEAN 6m MTProduction -CAGR Imports -CAGR 2019 FASEAN -APPARENT Steel CONSUMPTION10 ASC for H1 2019 is up from H1 2018 Production grew y-o-y to million MT Import rose to m MT, while export reached m MT Long products ASC rose to m MT (3% growth) Increase mainly due to rise in production Imports are slightly down Flat Products ASC is up to m MT Again increase was mainly from production growth being faster than import growthASEAN Apparent Steel Consumption is up in H1 2019 from H1 2018, mainly due to production growth to cater for increased demand for steelH1 2018H1 2019% GrowthProduction19,669,00921,577, ,747,44025,080, ,411,6137,483, ,004,83639,175, * hot rolled production onlyLong steelH1 2018H1 2019% GrowthProduction13,894,12215,183, ,377,6246,158, ,021,8982,552, ,249,84718,789, steelH1 2018H1 2019% GrowthProduction5,774,8886,394, ,369,81618,922, ,389,7154,930, ,754,98920,385.

5 Steel Consumption H1 2018 vs H1 2019 (MT)Long Steel Apparent Steel Consumption H1 2018 vs H1 2019 (MT)Flat Steel Apparent Steel Consumption H1 2018 vs H1 2019 (MT) ASEAN Economies ASEAN Steel Consumption ASEAN Steel Demand (Sectors) ASEAN Steel Production & Trade Apparent Steel Consumption Forecast11 OUTLINE:PARTA12 ASEAN Steel CONSUMING SECTORSC onstruction Sector remains the largest Steel consuming sector; Proportion of Flat Products consumed in ASEAN has increased significantly for ConstructionSource: SEAISI statistics, SEAISI study Construction Ship building & repair Automotive E&E Machinery & Industry PackagingOil & GasothersDemandDomesticExportImportConst ruc-tionShipBuildingAuto-motiveE&EMachin -ery&IndustryPackag-ingOil &GasOthersApparent Steel Consumption by Steel Consuming Sectors -2015 Study (m MT) Largest Steel consuming sector (2015 SEAISI study).

6 -Construction building Consumption has shifted towards flat products (1998 vs 2018 proportions), but these are mostly for constructionFlat vs Long Products Proportions13 ASEAN Steel CONSUMING SECTORSC onstruction Sector is the largest Steel consuming sector in all ASEAN -6 countries; The other major sectors are concentrated in a few countries onlySource: SEAISI statistics, SEAISI study 2015 Apparent Steel Consumption by Steel Consuming Sectors & Country -2015 Study (%) 0%10%20%30%40%50%60%70%80%90%100%Constru ctionAutomotiveShipbuildingElectrical &ElectronicsOil & GasMachinery &IndustryPackagingOthersAll CountriesTH, ID, MY, VNPH, VN, ID, SGTH, MY, IDID, MY, TH, PHTH, ID, MYTH, ID, MY, PH73%11%4% ASEAN Economies ASEAN Steel Consumption ASEAN Steel Demand (Sectors) ASEAN Steel Production & Trade Apparent Steel Consumption Forecast14 OUTLINE.

7 PARTAASEAN Steel PRODUCTION15 Major production volume increases, mainly due to new flat product capacities in Vietnam and IndonesiaASEAN Steel (2018) Consumption: m MT Production: m MT Net Imports: m MTProduction Growth Production increaeddue to new flat products capacities -Formosa Ha Tinh(Vietnam)-Krakatau Posco(Indonesia)-TsingshanSteel (Indonesia) Malaysia Steel production remained flat even though new capacity (Alliance Steel MT) has come onstreamSource: SEAISI statisticsmillion MT201620172018%Change (2017/18) 6 Steel Production by Country020406080100199820002002200420062 00820102012201420162018 Production -CAGR Imports -CAGR Steel Consumption for ASEAN 6m m 2019 FASEAN Steel PRODUCTION (FLATS VS LONGS)16 ASEAN Steel production is focused on long products, while growth in has been more in flat products.

8 Capacity utilization are still low, more severely in longsFocus of the Steel Industry Steel production is focused on long products New capacities coming up in the flat products-Proportion of flats was higher from 2016 to 2018 Capacity Utilisation Utilisationrates are low because:-New flat products mills are still on a ramp up-Low utilization in long products due to existing overcapacitySource: SEAISI statistics199819992000200120022003200420 0520062007200820092010201120122013201420 15201620172018 Flat productionLong production76%24%37%63%29%71% vs Long Production ProportionsLONG PRODUCT IMPORTS IN ASEAN17 ASEAN imported a total of million MT of long products in 2018, mainly from China, Japan, Korea and within ASEAN .

9 These are used in the Construction SectorTotal Import ASEAN imported a total of million MT of long Steel in 2018 Import by Products More than 80% of Steel imports are for the Construction sector-Wire Rod (36%)-Bar (27%)-Sections (19%)Import by Countries China continues to dominate long products supply, supplying 48% of Steel in 2018 The other major suppliers are from Japan (14%), Korea (10%), Turkey (5%) and Taiwan (4%) Intra ASEAN imports was 9%Source: SEAISI statisticsRails & Accessories2%Others5%Section19%Bar27%Wir e rod36%Seamless pipes11%China48%Korea10%ASEAN9%Japan14%T aiwan4%Turkey5%Others10%Long Products Import by Products (2018)Long Products Import by Countries (2018)FLAT PRODUCT IMPORTS IN ASEAN18 ASEAN imported a total of million MT of flat products in 2018, mainly from Japan, China, Korea and within ASEANT otal Import ASEAN imported a total of million MT of flat Steel in 2018 Import by Products More than 70% of Steel imports into ASEAN are -HR Coils (45%)-Coated Sheets (21%)-CR Coils (19%)-HR Plates (11%)Import by Countries Major supply of flat products came from -Japan (32%)-China (29%)-Korea (14%)

10 -Within ASEAN (12%)Source: SEAISI statisticsFlat Products Import by Products (2018)Flat Products Import by Countries (2018)HRP11%HRC45%CRC19%Galvanized11%Tin plate2%Other coated8%Welded4%China29%Korea14%ASEAN12% Japan32%Taiwan6%India3%Russia2%Others2%C oated sheets( ) ASEAN FINISHED Steel IMPORTS19 Finished Steel import slowed down in 2018 mainly due to increase in domestic production to serve domestic demand and to substitute imports Finished Steel import growth in most ASEAN -6 countries slowed down in 2018 Vietnam is the only country that experienced continued decline in Steel import, dropping in 2018 A major portion of the import in the region was high quality Steel , mainly to serve manufacturing sector One of main reasons for the slowdown in Steel import growth in ASEAN region was the increase in domestic production to serve domestic demand and to substitute importSource.