Posted on 05 Aug 2021
The SEAISI 50th Anniversary e-Conference & Exhibition is a resounding success with more than 40 speakers and about 400 delegates attending the event. One of highlights of the event is the CEO Panel Discussion which has the theme: Thriving in the Post COVID Norm.
The panel comprises:
Steel Industry Post COVID Norm
Dr Basson’s view is that COVID doesn’t really change anything much for the steel industry but it accelerates a number of changes that were already ongoing. He highlighted 4 key points:
Mr Fujisawa concurs with Dr Basson’s views and added additional points:
While Japan is viewed as an advance economy, other countries are catching up. Japan should speed up in terms of technology and product development.
Mr Purwono pointed out that the pandemic’s impact will continue to be the norm for the next 2-3 years:
Mr Da shared that Vietnam’s economy registered positive growth in 2020 and both steel production and grew significantly. He foresees that:
Global Supply Chain Shift into Vietnam
Will this shift benefit the steel industry? Mr Da highlighted that recent investments are for higher value sectors such as tele-communications, while the steel industry is still focused in low-end products for the construction industry.
He expects the industry to continue to adapt to market needs by evolving into production of higher end steel products. Hoa Phat, for example, has changed its business model to capture the entire steel value chain. They purchased an iron ore mine in Australia, expanded steel production with a 6 million tonne Dung Quat project and have forward integrated into the automotive, electric appliance and shipping sectors.
Another area of focus in the Vietnam steel industry is digitalisation and automation, in line with global trends.
Decarbonisation Efforts in ASEAN
Dr Basson pointed out that the Europe, Japan and other countries are already preparing for decarbonisation. The catalyst hastening the shift towards decarbonisation is China, with plans to achieve carbon neutrality by 2060. ASEAN countries will not have luxury to escape this trend, and there is a need to work on decarbonisation.
Issues that need tackling are the upcoming new capacities and the lack of scrap, which are likely to encourage investments in blast furnace capacities in ASEAN. As such, he advised the following:
In Mr Fujisawa’s view, ASEAN countries have its own uniqueness and differences and issues to cover, but steel producers have to consider decarbonisation. However, it is not something that steel producers can do on their own. It is necessary to work with the government on this.
In the meantime, the steel industry is a regional industry which have been impacted by the pandemic, affecting service to markets with logistics and border restrictions.
Massive Steel Sector Investment Interests in ASEAN
Mr Purwono highlighted that steel consumption per capita in Indonesia is still low and there is room for additional supply. Also, many investors are interested in Indonesia because of its population size and its good macroeconomics performance.
The key point is how does the government help protect current investors, especially during the pandemic. Steel consuming sectors e.g., the automotive sector, have seen a collapse in demand and incentives were needed to boost spending. It is critical that the government look after
existing investors, to encourage more investments.
Mr Purwono highlighted that the government should consider steel investments that manufacture products that are either insufficient or are not produced locally. Investments in steel sectors that are in a low-capacity utilisation situation should be discouraged, so that the steel industry will continue to be sustainable.
Dr Basson feels that the massive investments coming into ASEAN could end up destabilising the global markets. Many have blamed China for past overcapacity issues and he hopes ASEAN does not get into the same position.
ASEAN has been importing sizeable quantities of steel for many years, to strong demand in the region. He pointed out that the steel industry tends to overinvest in good times and underinvest in bad times and go through a typical up-and-down cycle in the industry.
Investors should do their calculations correctly to make sure new capacities will be competitive against existing ones. There is also the need to evaluate these capacities carefully from the perspective of the environment, future prospects and long-term market situation.
He concurs with Mr Fujisawa’s point that steel as an industry is in essence a regional industry. Of the 1.7 billion tonnes of steel produced and used on a global basis, 25% are crossing global borders. The other 75% are usually located within 500 km from where the plant is, where it would be eventually consumed.
The steel industry is moving towards regionalisation and we expect to see more and more trade protection activities globally. This needs to be managed accordingly.
Mr Da of Vietnam shares the view that Vietnam is also facing over-investments and overcapacity issues, especially in the long and colour coated products sectors.
While he expects steel production and consumption to continue to rise as the construction industry grows in ASEAN, he cautions that the steel industry is heading towards a structural change. Climate change and overcapacity issues are expected to see the phasing out of outdated capacity as well as the promotion of consolidation in the domestic and regional markets.
It was a great CEO Panel Discussion, with many insights from our panelists. SEAISI would like to thank Dr Edwin Basson, Mr Kazuo Fujisawa, Mr Nghiem Xuan Da and Mr Purwono Widodo for their contributions.
As the pandemic rages on, everyone needs to be careful. Keep Your Distance, Wear Your Masks, Stay Safe Always!
Yeoh Wee Jin
Source:SEAISI
