Taiwan Metals Industry Update Quarter 3 2011

• Publication date: August 2012
• Report size: 38 pages

Taiwanese steelmaking will face headwinds from the impact of the Japanese earthquake and an expected slowdown in the mainland Chinese industry, making them more dependent on growth in the domestic industry, according to this latest Taiwan Metals Report from BMI. In the first four months of 2011, Taiwanese crude steel output was up 10.4% year-on-year (y-o-y) to 6.83mn tonnes. The performance was weaker than BMI had anticipated and not enough t...

Taiwanese steelmaking will face headwinds from the impact of the Japanese earthquake and an expected slowdown in the mainland Chinese industry, making them more dependent on growth in the domestic industry, according to this latest Taiwan Metals Report from BMI.
In the first four months of 2011, Taiwanese crude steel output was up 10.4% year-on-year (y-o-y) to 6.83mn tonnes. The performance was weaker than BMI had anticipated and not enough to return the market to pre-recession norms. BMI estimates that the market is operating at 80-85% of full capacity. Output was lifted by 6.2% y-o-y and recorded 3.2% quarter-on-quarter (q-o-q) growth in Q111. In March, Taiwan’s industrial production index climbed by 13.8% y-o-y, the 17th consecutive month of double-digit growth. Manufacturing was up 14.4%, but building construction rose by just 2.7%, indicating the skewed nature of the recovery which is not favouring long products. This constitutes a major blow to producers using electric arc furnaces (EAFs), which rely on scrap and typically produce long products.
With around half of Taiwan’s crude steelmaking capacity in EAFs, compared with an average of less than 20% for Asia and 28% globally, the island’s steel market is vulnerable to declines in scrap supplies.
Scrap feedstock may decline in availability and therefore rise in price due to Japan’s infrastructural damage and the potential radioactive contamination of Japanese scrap. Japan is the world’s second biggest scrap exporter, typically supplying 7.5-9.5mn tonnes per year (tpa) of scrap to the world industry, while Taiwan typically imports over 5mn tpa of scrap. As such, Taiwanese EAFs may see margins squeezed, while failing to secure a foothold in a rapidly grow ing Japanese construction steel industry .
We are sticking with our below-consensus 2011 real Gross Domestic Product growth projection of 4.3%, as we expect to see a softer domestic property industry given the Chinese economic slowdown and ramifications from the Japanese disasters, which will weigh on Taiwan’s growth. There are already signs that this is negatively affecting Taiwanese steel production. In May 2011, China Steel Corporation (CSC)’s steel production volume dropped 1.1% month-on-month (m-o-m) and 7.0% y-o-y to 770,653 tonnes. This came on the back of a revenues drop of 4.0% m-o-m and 9.8% y-o-y to 783,000 tonnes. However, a rise in steel prices ensured that the steelmaker’s revenues revenue fell just 0.2% m-o-m and 2.6% y-o-y to TWD20.72bn (US Dollar 722mn).
While the recovery in 2010 was led by exports, the fortunes of the Taiwanese steel market in 2011 will depend on domestic demand. The domestic industry will be important in mitigating the market ’s dependence on the Chinese mainland, which is set to see a slowdown in its property industry, causing a chain reaction that will hurt Taiwanese steel exports. This is exacerbated to an extent by the lingering effects of the Japanese earthquake on the Taiwanese steel market and the country’s economy in general. Taiwan's export growth could also be dampened by supply disruptions.
As a result of domestic and external weaknesses, we have revised down our projections for the Taiwanese steel market . With exports now set to rise by 12% instead of the previously projection 23%, BMI projections crude output growth of 6.2% to 20.54mn tonnes, a downward revision from the 12.8% growth projection in the previous quarter. However, BMI has made no change to hot-rolled production, which we believe will rise 11.6% to 22.21mn tonnes in 2011, with growth generated by demand in the growing Taiwanese manufacturing segment .

Metal Mining Industry in Taiwan

Executive Summary 5
Industry SWOT Analysis 7
Taiwan Political Environment and Risk Analysis 7
Taiwan Economic Environment and Risk Analysis 8
Taiwan Business Environment SWOT . 8
World Market Overview 9
Steel Projection . 9
Steel to Average USD 580/tonne In 2011 9
BMI Steel Projection . 9
Steel Prices . 10
Cost Push On The Supply Side 10
Few Supply Constraints In Sight, For Now . 11
Commodities Projection 15
Commodity Strategy – Metals Update 15
Aluminium. 15
Copper 16
Gold 17
Lead 18
Nickel 19
Tin. 20
Zinc . 21
Regional Overview 22
Data : Top 10 Asian Steel Producers, 2009 22
Forecast Scenario . 26
Data : Taiwan’s Metals Market (‘000 tonnes unless stated), from 2008 to 2015 . 28

Macroeconomic Data . 29
Taiwan – Economic Activity . 31

Competitive Landscape 32
Steel 32
Aluminium. 34
Company Profiles 36
China Steel Corporation (CSC) 36
Chung Hung Steel . 37
World Assumptions, Q311. 38
Data : World Assumptions, from 2009 to 2015 38
Data : World And Regional Real Gross Domestic Product Growth, from 2010 to 2013 (% change y-o-y) . 39
Data : Selected Exchange Rates, from 2010 to 2013 (average) 39
Developed States . 40
Data : Developed States’ Gross Domestic Product Growth, from 2010 to 2013 (% change y-o-y) 41
Emerging Industries 42
Data : Emerging Industries’ Gross Domestic Product Growth, from 2010 to 2013 (% change y-o-y) 43
Consensus Projections . 44
Data : Bloomberg Consensus Gross Domestic Product Growth Projections, from 2011 to 2012 (% change y-o-y) . 44
BMI Methodology 45
How We Generate Our Market Projections . 45
Petrochemicals Market . 45
Cross Checks 46
Country Snapshot: Taiwan Demographic Data . 47

Section I : Population 47
Data : Demographic Indicators, 2000-2030 . 47

Section II : Labour Industry and Spending Power 48
Data : Employment Indicators, from 2000 to 2005 . 48
Data : Consumer Expenditure, from 2000 to 2005 (US$) . 48
Data : Average Annual Manufacturing Wages, from 2005 to 2012 48

Steel in Taiwan

Taiwan Iron And Steel, Exports, Us$mn

• $ 250
• Industry data
• February 2013

Yearly, From 1995 To 2017
By Business Monitor International
Source: UNCTAD

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Iron And Steel, Imports, Us$mn

• $ 250
• Industry data
• February 2013

Yearly, From 1995 To 2017
By Business Monitor International
Source: UNCTAD

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Iron And Steel, Exports, % Y-o-y

• $ 250
• Industry data
• February 2013

Yearly, From 1996 To 2017
By Business Monitor International
Source: BMI calculation

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Iron And Steel, Imports, % Y-o-y

• $ 250
• Industry data
• February 2013

Yearly, From 1996 To 2017
By Business Monitor International
Source: BMI calculation

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Crude Steel Production, `000 Tonnes

• $ 250
• Industry data
• February 2013

Yearly, From 1998 To 2017
By Business Monitor International
Source: World Steel Association

• Industries : Metal Mining
• Countries : Taiwan

Metal Mining in Taiwan

Taiwan Steel Imports, `000 Tonnes

• $ 250
• Industry data
• February 2013

Yearly, From 1998 To 2010
By Business Monitor International
Source: ISSB/World Steel Association

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Steel Exports, `000 Tonnes

• $ 250
• Industry data
• February 2013

Yearly, From 1998 To 2010
By Business Monitor International
Source: ISSB/World Steel Association

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Steel Imports, Us$mn

• $ 250
• Industry data
• February 2013

Yearly, From 2005 To 2010
By Business Monitor International
Source: ISSB, World Steel Assocation, BMI

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Steel Exports, Us$mn

• $ 250
• Industry data
• February 2013

Yearly, From 2005 To 2010
By Business Monitor International
Source: ISSB, World Steel Assocation, BMI

• Industries : Metal Mining
• Countries : Taiwan

Taiwan Crude Steel Production, Us$mn

• $ 250
• Industry data
• February 2013

Yearly, From 2005 To 2010
By Business Monitor International
Source: ISSB, World Steel Assocation, BMI

• Industries : Metal Mining
• Countries : Taiwan