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Taiwan Metals Report Q1 2012
Market |
Industrial |
Report Type |
Market Research |
Country |
Taiwan |
Published |
31 January 2012 |
Number of Pages |
44 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
- |
The situation facing the Taiwanese steel industry has declined markedly over recent months as Chinese economic growth slows, prompting BMI to forecast a contraction in the sector in 2012 in its latest Taiwan Metals Report.
In the first 11 months of 2011, Taiwanese crude steel output was up 13.7% year-on-year (y-o-y) to 20.5mn tonnes (mnt). This put it on course for output of 22.4mnt, helped by healthy export orders. The countrys basic metal and basic metal product export orders in the first 11 months of this year amounted to a value of US$28.2bn, up 15.0% y-o-y, although in November output was up just 2.5% y-o-y as the external market declined. We have also maintained our hot-rolled output forecast at 24.92mnt in 2011, with growth at 8.0% y-o-y. The industry is operating at around 85% full capacity with plenty of room for growth. Although growth was better than expected in H211, we believe that the inevitable contraction has simply been delayed rather than averted.
Industrial production has slowed and the outlook for the islands manufacturing sector continues to look bleak amid a deterioration in business conditions. Metals consumption in general will weaken as a result of stagnation and contraction in the countrys manufacturing sector. BMI forecasts domestic finished steel consumption falling 11% y-o-y to 16.64mnt in 2012, while steel exports will decline 6% to 10.34mnt in the same year. As a result of these trends and the higher base level caused by better than expected results in H211, we have revised down our crude steel output growth forecast from 10.0% to - 5.0% and our hot-rolled output growth forecast from 6.8% to -5.0%.
On the upside, we expect long steel to be supported by the governments multibillion dollar projects in the transport and energy infrastructure subsectors. Added to this is the effect of the post-tsunami reconstruction effort in Japan, which should help to tighten the Asian market over the medium-term and offset any slowdown in Chinese consumption growth. This should boost EAF-based production, which relies on scrap and typically produces long products. However, with around half of Taiwans crude steelmaking capacity in EAFs, compared with an average of less than 20% for Asia and 28% globally, the islands steel industry is vulnerable to a decline in scrap supplies.
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