SteelMint Scrap Summit: Uneven market prospects

Several presenters at the 4^th Steel Scrap, Billet & DRI Trade Summit, hosted by SteelMint in Bangkok in late August, provided insight into the growing steel industry and ferrous scrap trade in the ASEAN (Association of Southeast Asian Nations) region. ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Pichsini Tepa-Apirak of the Malaysia-based South East Asia Iron & Steel Institute (SEAISI) said Vietnam has been the rising steel consumption and production star in the region. The nation was the sixth-largest per capita consumer of steel in the ASEAN region in the 1990s, but now ranks first.

As of 2018, Vietnam produces 45 percent of steel made in the ASEAN region, far ahead of Thailand (19 percent) and Indonesia (18 percent). The remainder of crude steel or foundry iron produced comes from Malaysia (12 percent), the Philippines (4 percent) and Singapore (2 percent).

Electric arc furnaces (EAFs) provide much of the region’s capacity, with Tepa-Apirak referring to such production as “mostly scrap-based.” SEAISI estimated the region’s domestic ferrous scrap supply at 20.3 million metric tons in 2018, prompting ASEAN steelmakers to import some 10.4 million metric tons of scrap that year.

Vietnam and Indonesia are the largest scrap importers, with the United States and Japan acting as the largest scrap suppliers to the region, said Tepa-Apirak.

While additional steelmaking capacity is being added in the region, particularly in Vietnam and Indonesia, Tepa-Apirak said several other ASEAN nations (including Thailand and the Philippines) seem content to import sizable amounts of finished steel and semi-finished billets.

Rajiv Mangal, president and CEO of Tata Steel Thailand, said that nation has banned the installation of any new steel rebar production capacity for the next five years, in part because the nation’s current mills are struggling with a low capacity utilization rate.

The demand for steel in construction applications in Thailand has dropped by 9 percent in the first half of 2019, said Mangal, but momentum could shift if several planned infrastructure projects get underway in 2020. “I feel past 2020, we should see a boost in steel demand from Thailand,” he stated.

R.S. (Raj) Vaidhyanathan of the United Arab Emirates-based scrap trading firm Indicaa Group Ltd. said the growing flow of ferrous scrap into the ASEAN region and the Indian subcontinent is prompting the question of when and how a new benchmark ferrous scrap export price may need to be established. Currently, prices to largest global scrap importer Turkey most often serve as the benchmark price.

Vaidhyanathan said Asian nations combined are now involved in 33.1 million metric tons of ferrous scrap trading, surpassing Turkey’s 20.7 million metric tons of activity. However, that 33 million metric tons of trading is divided among several nations, including Vietnam in the ASEAN region as well as India and Pakistan on the Indian subcontinent and South Korea and Japan in East Asia.

That division makes finding an individual nation to replace Turkey as a “benchmark setter” difficult, said Vaidhyanathan. He pointed to Bangladesh and to Vietnam—which accepts both break-bulk and containerized scrap cargoes—as nations to watch.

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The SteelMint 4^th Steel Scrap, Billet & DRI Trade Summit was August 27-29, 2019, at the Hotel Avani Riverside in Bangkok.