Never mind the eurozone debt crisis.
For just a while, forget about talk of China having a hard or
In Southeast Asia, where economic growth is still robust and
steel consumption is still growing fast, the steel industry had
plenty to cheer at its annual gathering in Bali this
Steel consumption in Southeast Asia crossed 50 million tonnes
for the first time in 2011.
The 10 countries economies which form the Assn of
Southeast Asia Nations (Asean) are expected to grow at a
combined 5.6% this year.
Steel consumption in some of these countries could rise as much
as 10%, according to figures from the South East Asia Iron and
Steel Institute (Seaisi), which hosted the Bali event.
Meanwhile, foreign investment continues to pour in.
Taiwan's Formosa Plastics Group and China Steel Corp are building a 22.5 million tpy integrated
the regions largest in
Vietnam. It is set for completion by 2020.
The first stage of Indonesias Krakatau Steels joint
venture 3 million tpy integrated steel plant with South
Koreas Posco is set for commissioning in a years
For the first time, the regions steel industry also
welcomed Myanmar, a rising hotspot with plenty of
Southeast Asia seems to be the apple of everybodys
eye now, said Wellington Tong, president of Pag-asa Steel
Works in the Philippines.
Complaints against Chinese imports
The cheerful mood at Seaisi's conference was however
marred by some unhappiness about cheap imports from
In fact, the possibility of putting up some protective measures
against imports, especially those from China, was a major
talking point among delegates during the three days of the
In recent months, Chinese mills and traders have flooded the
Southeast Asian region with cheap steel offers.
Steel prices in Southeast Asia are generally higher than prices
in China, which made the region an obvious target for
Some of the regions mills claimed that their sales
suffered in the face of these cheap Chinese imports.
Tata Steel Thailand and some Malaysian mills have
already lodged complaints with their governments
against cheap boron-containing wire rod imports from
Its [common] that countries build walls or curtains
or whatever, to provide some kind of hurdle against cheap
imports, Wikrom Vajragupta, chairman of the Iron and
Steel Institute of Thailand, said.
Third cry for protection
Ongoing talks about protective measures against cheap
imports to protect the regions domestic mills are the
third in recent years.
The first round came soon after the 2008 financial crisis. It
led Indonesia and Vietnam to raise import duties for some steel
products then by putting steel mills under the sensitive
Non-fiscal measures were attempted too, with Indonesia
implementing a national standard of steel (SNI) in 2009, which
all exporters had to adhere to before being certified to export
into the country.
The measures helped local mills to weather the crisis.
The SNI saw steel imports into Indonesia falling by as much as
50% in the first half of 2010, preventing the closure of many
small domestic mills in the country.
The second cry for protection was in 2010 as Asean was about to
sign a free trade agreement with China that would see the
scraping of import tariffs for 90% of goods, including
electronics, auto parts, as well as steel products.
Indonesias local steel industry pushed its government to
renegotiate the FTA to protect its steelmakers against any
future flooding of cheap steel imports from China.
But the renegotiation stopped halfway with little fanfare as
the fear of cheap imports flooding domestic markets did not
What differentiates the call for protection this time around is
its unique timing.
Today, Southeast Asia is in much better shape than two years
ago. The regions economy has performed better compared
with Europe, the USA, or even other countries in Asia.
The manufacturing sectors did suffer because of slowdown in
orders from Europe and the USA. But the construction and
service sectors continue to grow at a healthy pace, thanks to
resilient domestic demand.
Given the bullish market sentiment, the mounting calls for
protectionism from the region sound rather out of place.
It took an outsider to remind the region that they are not the
only ones having a difficult time.
Are you complaining about Chinese imports?
Everybodys affected, China Steel Corp chairman Tsou
Jo-Chi said during a panel discussion.
He later qualified himself.
[Protectionism] happens all over the globe at the same
time now. [There is] no coordination, he said.
As everyone loses money when the market slows down, self
preservation kicks in, Tsou said.
Other industry insiders agree.
I think free trade is only applicable when the global
economy is in good shape, Krakatau Steels president
director Fazwar Bujang said.
When the economy is in bad shape, [free trade] may not
work for everybody. There will be some natural tendencies for
countries to protect their own interests, he said.
When its during good time, nobody complains about
imports, Ng Sem Guan, a steel analyst in OKS Research in
But when wire rod market is slowing down like right now,
any little imports are [significant] to domestic mills,
Breaking away from commodity cycle
So is regularly calling for protective measures the
only way for self-preservation?
Most importantly, are there any ways to break away from the
Last year, the same conference saw a heated discussion on the
benefits of consolidation
By consolidating with competitors or other mills in the value
chain, mills can reap economics of scale such as in terms of
procurement of raw materials, R&D, and marketing, thus
raising their competitiveness.
Unfortunately, this topic is not followed up in this
conference, and mills failed to report back on whether they
have attempted any consolidation efforts.
Another method suggested is through product differentiation and
Tata Steel Thailand the same company that has lodged
against cheap imports from China in one session of the
conference presented a paper on how to remain competitive in
rebar market in Thailand.
We learned that 40% of the market was using rebar of
below par quality. By getting this kind of market information,
we can educate our market to [differentiate] between our brand
from [competitors], of Tata Steel Thailand vp of
marketing and sales Sunil Seth.
Today, Tata Steel Thailand remains a market leader with 25%
market share in rebar market in Thailand.
This could very well be a lesson for other steelmakers in the
region and beyond to fight competition heads-on, over the
alternative of asking the government for protective