Steel Production Expansion in Southeast Asia Raises Oversupply Concerns
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Steel production capacity in Southeast Asia continues to expand. This raises concerns about oversupply and declining profit margins. The Southeast Asia Iron and Steel Institute (SEAISI) has urged the industry to stop investing in an already crowded market.
Key Countries Driving ExpansionMalaysia, Vietnam, the Philippines, and Indonesia are the main drivers of this expansion.
Malaysia plans to add 21 million tons/year of new steel production capacity. This includes:2 million tons/year from Eastern Steel by the end of 20242.5 million tons/year from E-Steel Sabah6.5 million tons/year from Alliance Steel by 2026Wenan Steel is building a project with a capacity of 10 million tons/year, but the completion date is unclear
Indonesia expects new capacity of 3 million tons/year by 2024 from companies like Gunung Group, New Asia, and Lautan. The Krakatau Steel-Posco joint venture plans to add 4 million tons/year by 2026.
Vietnam aims to increase capacity by 5.6 million tons/year from Hoa Phat by 2025. Other plants are expected to add 20 million tons/year, although timelines are not specified.
The Philippines will see a capacity increase of 14 million tons/year from Panhua and SteelAsia.
Regional Capacity GrowthSEAISI predicts that if all new capacity plans are realized, the region's crude steel capacity will increase by over 100 million tons/year by 2030, more than doubling the total capacity. This rapid capacity growth is concerning as regional demand growth is expected to be significantly lower.
In 2023, the crude steel capacity of SEAISI's six main members—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—was 78 million tons/year. However, steel production in the region fell by 2.1% from the previous year to below 50 million tons.
Impact of Global DynamicsMany new steel projects were announced before the Covid-19 pandemic and were linked to regional exports, especially to China. However, increased steel exports from China since 2023 have led steel producers to reconsider investing in new projects.
According to Chinese customs data, China's steel exports in 2023 increased by 36.2% from the previous year to 90.3 million tons. China exported 35 million tons of steel from January to April this year, 27% higher than the previous year. Chinese steel exports are expected to remain high due to weak domestic demand, particularly in the real estate sector, which is a major consumer of steel and is recovering slowly.
Market ImplicationsThe oversupply situation in Southeast Asia, combined with increased steel exports from China, has put pressure on the Asian steel market and the profit margins of Southeast Asia steel producers.
Market participants believe that lower expected profits and increased competition might force steel producers to scale back or delay their expansion plans in the coming years.
Steel production capacity in Southeast Asia continues to expand. This raises concerns about oversupply and declining profit margins. The Southeast Asia Iron and Steel Institute (SEAISI) has urged the industry to stop investing in an already crowded market.
Key Countries Driving Expansion
Malaysia, Vietnam, the Philippines, and Indonesia are the main drivers of this expansion.
Malaysia plans to add 21 million tons/year of new steel production capacity. This includes:
2 million tons/year from Eastern Steel by the end of 2024
2.5 million tons/year from E-Steel Sabah
6.5 million tons/year from Alliance Steel by 2026
Wenan Steel is building a project with a capacity of 10 million tons/year, but the completion date is unclear
Indonesia expects new capacity of 3 million tons/year by 2024 from companies like Gunung Group, New Asia, and Lautan. The Krakatau Steel-Posco joint venture plans to add 4 million tons/year by 2026.
Vietnam aims to increase capacity by 5.6 million tons/year from Hoa Phat by 2025. Other plants are expected to add 20 million tons/year, although timelines are not specified.
The Philippines will see a capacity increase of 14 million tons/year from Panhua and SteelAsia.
Regional Capacity Growth
SEAISI predicts that if all new capacity plans are realized, the region's crude steel capacity will increase by over 100 million tons/year by 2030, more than doubling the total capacity. This rapid capacity growth is concerning as regional demand growth is expected to be significantly lower.
In 2023, the crude steel capacity of SEAISI's six main members—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—was 78 million tons/year. However, steel production in the region fell by 2.1% from the previous year to below 50 million tons.
Impact of Global Dynamics
Many new steel projects were announced before the Covid-19 pandemic and were linked to regional exports, especially to China. However, increased steel exports from China since 2023 have led steel producers to reconsider investing in new projects.
According to Chinese customs data, China's steel exports in 2023 increased by 36.2% from the previous year to 90.3 million tons. China exported 35 million tons of steel from January to April this year, 27% higher than the previous year. Chinese steel exports are expected to remain high due to weak domestic demand, particularly in the real estate sector, which is a major consumer of steel and is recovering slowly.
Market Implications
The oversupply situation in Southeast Asia, combined with increased steel exports from China, has put pressure on the Asian steel market and the profit margins of Southeast Asia steel producers.
Market participants believe that lower expected profits and increased competition might force steel producers to scale back or delay their expansion plans in the coming years.
Introduction to Nam Kim Steel
Nam Kim Steel, also known as Ton Nam Kim, is a leading producer of galvanized steel in Vietnam. They provide high-quality steel products for various industries, ensuring durability and reliability. Their galvanized steel is widely used in construction and manufacturing, known for its excellent corrosion resistance and long-lasting performance. Nam Kim Steel continues to innovate and meet the demands of both domestic and international markets. For more information about our products and services, please contact us directly:
TEL/WHATSAPP: +84 965047865
EMAIL: trietlm@namkimgroup.vn
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