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Taiwan Metals Report Q4 2009
Business Monitor International, Sep 2009, Pages: 43
Taiwan Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Taiwan's metals industry.
The international financial crisis and the slowdown in the Chinese market are continuing to hit Taiwanese steelmakers, but there is a growing sense of cautious optimism as the Chinese government’s stimulus package begins to lift metals market across East Asia, according to the latest Taiwan Metals Report. In H109, Taiwan’s steel output fell 32.3% year-on-year (y-o-y) to 7.33mn tonnes as the contraction witnessed in Q408 – when output fell 20.5% y-o-y to 4.4mn tonnes – deepened. In June 2009, output was down 29.5% y-o-y to 1.12mn tonnes and down 20.4% over January.
The report notes that the steel market situation in Taiwan has improved as stock inventories had, by Q209, been largely depleted and demand in some segments started to recover. Reports in May and June suggest that, at the very least, the market had reached and perhaps passed its low-point and from there the only way is up. Taiwan’s major coating steel mill, Sysco, and Taiwan major cold roll steel mill, Kao Hsing Chang, announced that their production had been ramped back up to full capacity in June, although low order prices mean that they are expected to see profits diminish further in Q209.
The authors believe the poor performance in China and other Asian markets will lead to a 23.5% drop in steel exports to 7.45mn tonnes. But the domestic market will fare worse, with apparent finished steel demand down 30% to 12.7mn tonnes. Combined with the deterioration in domestic demand, steel output is forecast to drop by 26.1% to 14.93mn tonnes in 2009, not helped by the continuing decline in the value of the Taiwanese dollar, which is raising the cost of imported raw materials. The authors have raised its crude steel growth forecast for 2010 from 8.6% to 11.7%.
Over the short term, there are concerns about the effects of over-capacity, with the report forecasting that an increase in furnace capacity at the China Steel Corporation (CSC)’s Dragon Steel subsidiary will be partly offset by planned maintenance turnarounds at other furnaces. Meanwhile, Taiwan is hoping to entice Taiwanese businesses operating in China to return to the island with the offer of tax breaks, subsidised loans and lower rents on land, but the authors are sceptical about any such initiative bringing back much business, given the state of the domestic economy and the decline in key export markets.
Based on these uncertainties and continuing lacklustre performance in the domestic market, the authors do not believe that steel output will fully recover to its 2007 peak within the next five years. By 2013, output should reach 19mn tonnes – down 5.9% on 2008. However, a projected improvement in steel prices should see production reaching US$17.42bn in value terms, a decline of 2.4% over 2008. Hot-rolled production will recover to near-2008 levels of 21.2mn tonnes, utilising more imported feedstock. Output growth should be stimulated by exports as the Chinese market revives, while the domestic market will lag behind. The report predicts exports will reach 9.81mn tonnes by 2013, approaching 2008 levels. At the same time, finished steel use will reach 17.38mn tonnes, down 4% on 2008.
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