ASEAN steel industry picked up significantly in 2010 with a double digit growth rate after suffering from the financial crisis in 2008. Total steel consumption in the region touched nearly 49 million tonnes, a surge of 17.5% YoY.
The substantial increase was led mainly by the high growth rate in Thailand, Indonesia and Malaysia. According to the TATA Steel Group, steel industry in South East Asia is expected to be one of the faster growth regions of the world with an average annual growth rate of 7.6% for the next ten years, compared to the average growth rate of 6.2% over the past ten years.
The construction sector is the major driver for steel consumption in the region. Approximately 63% of the steel consumption in the region comes from the construction sector.
Whenever there is an economic crisis, the first economic stimulus measure launched by the government is inevitably to boost up mega projects which will lead to more steel use for infrastructure and other construction sectors.
Malaysia’s construction sector registered a significantly high growth rate of more than 6% in 2008 but has since then started to decline to around 4-5%.
The Philippines construction sector touched a double digit growth rate of 10% in 2009 and this growth rate was maintained throughout 2010. The Singapore government successfully raised demand for the construction sector with a growth rate of 15-20% during the height of the economic crisis but the expansion has subsided and the sector registered only an increase of 5% in 2010.
Thailand suffered from a sharp drop of demand for the construction sector during the crisis with a negative growth rate of nearly -6% for the sector. However, the country has recovered well with projects from both the government and private sectors to boost the construction sector growth to above 6% YoY. The growth rate is expected to remain at above 4% YoY up to the year 2019. Indonesia’s construction sector seems to enjoy stable growth and is projected to grow by more than 6% per annum up to 2019.
On the supply side, steel industry in the region is basically self-sufficient in terms of domestic supply for construction steel. Most of the long product capacity is used to produce construction steel and less than half of the capacity is being utilized at the moment.
What should be the direction for the steel industry to better serve the construction sector if capacity is not an issue? Interestingly, the Singapore government has taken various measures to promote alternative steel materials for construction and improve productivity across all sectors including the construction sector.
The government of Singapore envisions the construction industry of the near future to be highly integrated and technologically advanced as well as highly productive. The country’s Building and Construction Authority provides financial support to improve the industry by launching the USD 250 million Construction Productivity and Capability Fund last year. To date, more than 760 companies have applied for the various schemes under the Fund and more than $11 million has been committed to the successful applicants.
It is perhaps time for the steel producers in the region to focus on improving steel quality and applications to complement the construction sector’s productivity improvement effort. Otherwise, in the near future there might be a need for ASEAN to import steel for construction from other countries.
(Sourced from SEAISI)
