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Taiwan Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7069 Description Low stock inventories and rising demand are raising the price of Taiwanese steel, with BMI’s latestTaiwan Metals Report forecasting a recovery in the industry in H209.In the first four months of 2009, Taiwan’s steel output fell 30.9% year-on-year (y-o-y) to 5.07mn tonnes,with a deepening of the contraction witnessed in Q408 when output fell 20.5% y-o-y to 4.4mn tonnes.The international financial crisis and the slowdown in the Chinese market are continuing to hit Taiwanesesteelmakers. On the upside, steelmakers were undercutting Chinese producers’ prices with a price ofUS$420 fob per tonne of rebar compared to China’s US$455-495 and Japan’s US$445-450 in mid-May. Taiwanese steelmakers were able to offer cheaper prices because they bought cheap scrap and billet inQ109. Taiwan-based China Steel Corporation cut its list prices three times in H209 with an average cutof 22.56% Q109, a further 14.03% for April and May and 9.41% in June as it sought to compete withChinese producers. This meant that for many products, it was selling at below cost price in order tosupport its clients over the short-term. BMI notes that the steel market situation in Taiwan has improved as stock inventories had, by Q209, beenlargely depleted and demand in some segments had started to recover. Reports in May and June suggestthat, at the very least, the market had reached - and perhaps passed - its low-point, and from there theonly way is up. Taiwan’s leading coating steel mill, Sysco, and cold roll steel mill, Kao Hsing Chang,announced their production had been ramped back up to full capacity in June, although low order pricesmean that they are expected to see profits diminish further in Q209. BMI expects a recovery to begin inH209, with rising prices likely to enable steelmakers to boost profitability. BMI believes the poor overall performance in China and other Asian markets will lead to a 23.2% drop insteel exports to 7.47mn tonnes. Combined with the deterioration in domestic demand, steel output isforecast to drop by 23.4% to 15.47mn tonnes in 2009, not helped by the continuing decline in the value ofthe Taiwanese dollar, which is raising the cost of imported raw materials. The Taiwanese steel industryhas passed its low-point and BMI has raised its crude steel growth forecast for 2010 from 3.8% to 8.6%. Based on these uncertainties and continuing lacklustre performance in the domestic market, BMI does notbelieve that steel output will fully recover to the 2007 peak within the next five years. By 2013, outputshould reach 20.31mn tonnes - just 0.5% up on 2008. However, a projected improvement in steel pricesshould see production in value terms reaching US$18.59bn, an increase of 4.2% over 2008. Growthshould be stimulated by exports as the Chinese market revives, while the domestic market will lag behind. BMI believes exports will reach 9.84mn tonnes by 2013, when 2008 levels will be exceeded for the firsttime since the recession began. Nevertheless, there is long-term optimism, with CSC continuing to investin the expansion of its Dragon Steel subsidiary, including a 2.5mn tonnes per annum (tpa) blast furnacecomplex due to open in H209 and a 3mn tpa hot strip mill by mid-2010, with a view to raising its capacityto 4mn tpa in a second phase construction. Table of Contents
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