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Taiwan Metals Report Q2 2011

Taiwan Metals Report Q2 2011

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Additional Information

Price	$530.00
Meta Description	No
Publisher	Business Monitor International
Date of Report	Apr 15, 2011

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Quick Overview

The Taiwanese steel industry is set to benefit from increased export orders following the Japanese earthquake disaster in March. Both market recovery and recent increases in steelmaking capacity should ensure record output levels in Taiwan in 2011, with annual growth expected over the medium term. BMI forecasts Taiwanese crude steel output rising 12.8% year-on-year (y-o-y) to 21.76mn tonnes in 2011, nearly 1mn tonnes more than forecast in the previous quarterly report, while hot-rolled output will grow 11.6% to 22.21mn tonnes. Meanwhile, exports of semi-finished and finished products should reach just under 11mn tonnes, up 23% y-o-y and almost reaching the pre-crisis levels seen in 2007.
The appreciation of the Taiwanese dollar in H210 enabled China Steel Corporation (CSC), Taiwan’s leading steelmaker, to maintain domestic steel prices below the international average, but in H111 the currency’s depreciation, coupled with rising coking coal and iron ore prices, prompted CSC to increase average prices for domestic steel products by 12.1% to TWD2,811/tonne in April-May 2011. This will put pressure on local downstream steel firms, particularly the shipbuilding, automotive and home appliance segments, in terms of higher production costs. However, it will be catching up with mainland Chinese and Japanese competitors, which have been raising prices while Taiwanese prices have remained largely stable. BMI believes Taiwanese HRC prices could rise by over 40% during the course of 2011, reaching around US$1,200/tonne by the year-end as a consequence of raw material cost rises and regional market tightness caused by the Japanese earthquake.
In the short term, Taiwan-based steelmakers will be able to plug the gap in the market created by the disruption of Japanese supply. Although most Japanese mills were unscathed by the earthquakes that hit the country’s northeast, Taiwanese output can easily substitute Japan’s high-end steel products, particularly in the flats segments, which gives it an advantage over Chinese steelmaking. In the immediate aftermath of the earthquake, CSC was circumspect about whether it would receive any direct orders for the reconstruction efforts, but at the very least it will be able to take advantage of the reduction in Japanese steel export volumes.
However, with around half of Taiwan’s crude steelmaking capacity in electric arc furnaces (EAFs), compared with an average of less than 20% for Asia and 28% globally, the island’s steel industry is vulnerable to a decline in scrap supplies. Scrap feedstock may decline in availability and therefore rise in price due to Japan’s infrastructural damage and potential radioactive contamination of Japanese scrap. Japan is the world’s second biggest scrap exporter, typically supplying 7.5-9.5mn tonnes per annum (tpa) of scrap to the world market, 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 expanding Japanese construction steel market.

Table of Contents

Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 6
Taiwan Political SWOT ........................................................................................................................................................................................ 6
Taiwan Economic SWOT ...................................................................................................................................................................................... 7
Taiwan Business Environment SWOT ................................................................................................................................................................... 8
Global Market Overview.................................................................................................................................. 9
Steel To Average US$580/Tonne In 2011 ............................................................................................................................................................. 9
Table: BMI’s Steel Forecasts ................................................................................................................................................................................ 9
Table: Steel Prices (US$m/t) ............................................................................................................................................................................... 10
Commodities Forecast .................................................................................................................................. 15
Commodity Strategy – Metals Update ...................................................................................................................................................................... 15
Aluminium........................................................................................................................................................................................................... 15
Copper ................................................................................................................................................................................................................ 15
Lead .................................................................................................................................................................................................................... 16
Nickel .................................................................................................................................................................................................................. 17
Tin....................................................................................................................................................................................................................... 18
Zinc ..................................................................................................................................................................................................................... 18
Gold .................................................................................................................................................................................................................... 19
Regional Overview ........................................................................................................................................ 21
Table: Top 10 Asian Steel Producers, 2009 ........................................................................................................................................................ 21
Forecast Scenario ......................................................................................................................................... 25
Table: Taiwan’s Metals Industry (‘000 tonnes unless stated), 2008-2015 ........................................................................................................... 27
Macroeconomic Outlook ..................................................................................................................................................................................... 28
Table: Taiwan – Economic Activity, 2008-2015 ................................................................................................................................................. 30
Competitive Landscape ................................................................................................................................ 31
Steel .................................................................................................................................................................................................................... 31
Aluminium........................................................................................................................................................................................................... 32
Company Profiles .......................................................................................................................................... 34
China Steel Corporation (CSC) .......................................................................................................................................................................... 34
Chung Hung Steel ............................................................................................................................................................................................... 35
Global Assumptions Q2 2011 ....................................................................................................................... 36
Table: Global Assumptions, 2009-2015 .............................................................................................................................................................. 36
Table: Regional Real GDP Growth, 2010-2013 (% change y-o-y) ...................................................................................................................... 37
Table: Selected Exchange Rates, 2010-2013 (average) ...................................................................................................................................... 37
Developed States ................................................................................................................................................................................................. 38
Table: Developed States’ GDP Growth, 2010-2013 (% change y-o-y) ................................................................................................................ 39
Emerging Markets .............................................................................................................................................................................................. 39
Table: Emerging Market’s GDP Growth, 2010-2013 (% change y-o-y) .............................................................................................................. 40
Consensus Forecasts........................................................................................................................................................................................... 41
Table: Consensus Forecasts, 2011 And 2012 ..................................................................................................................................................... 41
BMI Methodology .......................................................................................................................................... 42
How We Generate Our Industry Forecasts ......................................................................................................................................................... 42
Petrochemicals Industry ..................................................................................................................................................................................... 42
Cross Checks ...................................................................................................................................................................................................... 43
Country Snapshot: Taiwan Demographic Data ........................................................................................... 44
Section 1: Population .......................................................................................................................................................................................... 44
Table: Demographic Indicators, 2000-2030 ....................................................................................................................................................... 44
Section 2: Labour Market and Spending Power.................................................................................................................................................. 45
Table: Employment Indicators, 2000-2005 ......................................................................................................................................................... 45
Table: Consumer Expenditure, 2000-2005 (US$) ............................................................................................................................................... 45
Table: Average Annual Manufacturing Wages, 2005-2012 ................................................................................................................................ 45