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Taiwan Metals Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: September 2009 Product Code: R302-8213 Description The international financial crisis and the slowdown in the Chinese market are continuing to hit Taiwanesesteelmakers, but there is a growing sense of cautious optimism as the Chinese government’s stimuluspackage begins to lift metals market across East Asia, according to BMI’s latest Taiwan Metals Report.In H109, Taiwan’s steel output fell 32.3% year-on-year (y-o-y) to 7.33mn tonnes as the contractionwitnessed in Q408 - when output fell 20.5% y-o-y to 4.4mn tonnes - deepened. In June 2009, output wasdown 29.5% y-o-y to 1.12mn tonnes and down 20.4% over January. BMI notes that the steel market situation in Taiwan has improved as stock inventories had, by Q209, beenlargely depleted and demand in some segments started to recover. Reports in May and June suggest that,at the very least, the market had reached and perhaps passed its low-point and from there the only way isup. Taiwan’s major coating steel mill, Sysco, and Taiwan major cold roll steel mill, Kao Hsing Chang,announced that their production had been ramped back up to full capacity in June, although low orderprices mean that they are expected to see profits diminish further in Q209. BMI believes the poor performance in China and other Asian markets will lead to a 23.5% drop in steelexports to 7.45mn tonnes. But the domestic market will fare worse, with apparent finished steel demanddown 30% to 12.7mn tonnes. Combined with the deterioration in domestic demand, steel output isforecast to drop by 26.1% to 14.93mn tonnes in 2009, not helped by the continuing decline in the value ofthe Taiwanese dollar, which is raising the cost of imported raw materials. BMI has raised its crude steelgrowth forecast for 2010 from 8.6% to 11.7%. Over the short term, there are concerns about the effects ofover-capacity, with BMI forecasting that an increase in furnace capacity at the China Steel Corporation(CSC)’s Dragon Steel subsidiary will be partly offset by planned maintenance turnarounds at otherfurnaces. Meanwhile, Taiwan is hoping to entice Taiwanese businesses operating in China to return to theisland with the offer of tax breaks, subsidised loans and lower rents on land, but BMI is sceptical aboutany such initiative bringing back much business, given the state of the domestic economy and the declinein key export markets. Based on these uncertainties and continuing lacklustre performance in the domestic market, BMI does notbelieve that steel output will fully recover to its 2007 peak within the next five years. By 2013, outputshould reach 19mn tonnes - down 5.9% on 2008. However, a projected improvement in steel pricesshould see production reaching US$17.42bn in value terms, a decline of 2.4% over 2008. Hot-rolledproduction will recover to near-2008 levels of 21.2mn tonnes, utilising more imported feedstock. Outputgrowth should be stimulated by exports as the Chinese market revives, while the domestic market will lagbehind. BMI believes exports will reach 9.81mn tonnes by 2013, approaching 2008 levels. At the sametime, finished steel use will reach 17.38mn tonnes, down 4% on 2008. Table of Contents
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