In Southeast Asia, slab prices edged down early this month due to low demand and plentiful supply. Demand in the region is set to remain weak in the short term due to the uncertainty caused after 25% tariff on the US imports which affected various markets, particularly Asia. Meanwhile, demand in Malaysia and Indonesia remained lacklustre due to the Muslim’s holy month of Ramadan which started from 17th May.
In Vietnam, steel imports from China are expected to squeeze as Formosa Ha Tinh Steel in Vietnam has now started its 2nd blast furnace. This will take the company aggregate carbon steelmaking capacity to around 7 million tonnes per year. The company flat steel production capacity is reached around 5 million tonnes annually, leading to a significant drop of hot rolled steel imports. In the past, Vietnamese rolling mills were dependent on imported HRC, particularly from China.
As the US started negotiation with China to avoid a trade war, Japan has also prepared a retaliation plan of about $400 million tariffs on the US imports in response to Trump Tariff plan. This attempt seems like Japanese bargaining chip in the negotiations process to get tariff exemption.
In South Asia, flat steel prices in India increased at the start of May on the back of improved demand and less imports. Looking at the Indian supply side equation, the National Company Law Tribunal in India allowed Tata Steel to buy the Bankrupted Bhusan Steel, a major flat steel producer of India. JSW has also received a green signal from the Competition Commission of India to acquire Monnet Ispat, while ArcelorMittal has been clearing its path for acquiring Essar Steel. All the three bankrupted steel mills are expected to be with the new owners soon.
Most of the Indian flat steel market was dominated by six major players which are now reduced to 3-4 players. These changes in the competitive landscape would affect domestic flat steel prices in the coming years. We also understand that this can lead to better economies of scale and high capacity utilisation resulting better market prices, though the role of price monitoring authorities would also be pivotal going forward.
The Indian Automotive market is exhibiting growth and consequently driving demand for flat steel. Honda Motorcycle & Scooter India (HMSI), a two-wheeler manufacturer in India, has announced to invest $117 million in the current year as the company sales grew 22% year- on- year in 2017-2018. Demand for white goods in India this summer has so far not seen any significant growth partly due to heavy rainfall in some parts of the country. The weakening Indian rupee against the US dollar may also increase white goods prices further, affecting domestic demand.
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