ASEAN car industry's drawn-out recovery to impact steel demand

14 September 2020
ASEAN car industry's drawn-out recovery to impact steel demand
           The ASEAN car industry's recovery from the COVID-19 pandemic could be a prolonged process impacting steel demand for a longer period, while new waves of COVID-19 infections raise concerns that an upswing in gasoline demand will also be protracted.
           Data from the ASEAN Automotive Federation suggest that leading carmakers such as Indonesia and Thailand worked month by month to restore production and sales to pre-COVID-19 levels.
           For instance, Indonesia's production in July jumped 43.4% to 25,283 units from 17,628 units in June, while sales for the month doubled on the month to 25,283 units. However, the production and sales figures were down 79.6% and 71.7% respectively from a year earlier.
           Over in Thailand, July vehicle production and sales stood at 89,336 units and 59,335 units, respectively. Like Indonesia, the Thai July production figure was higher than June's output of 71,704 units, while the sales were fairly flat from 58,049 units posted in June 2020.
           However, the production was down 46.7% and the sales shed 26.8% against July 2019.
           For January-July period, Indonesian production was down 44.7%, while Thai output declined 43.8% from the year earlier period. Similarly, Thai sales for January-July period fell 35.9%, while Indonesia witnessed 49.9% decline from a year ago.
           The Federation of Thai Industries projected Aug. 21 that production will reach 1.3 million to 1.4 million units for 2020 but noted Thailand's vehicle industry may take five years to recover to pre-pandemic levels. As of July, production has reached 49.7% to 53.5% of FTI's projected range. In 2019, production amounted to 2.01 million units.
           Meanwhile, Thailand's steel consumption is expected to fall to between 16.73 million and 17.89 million mt in 2020 from 18.59 million mt in 2019, data from the Iron and Steel Institute of Thailand showed. The Thai vehicle industry accounts for about 22% of overall consumption.
           Similarly, the Association of Indonesian Automotive Manufacturers, or Gaikindo, projected sales of 600,000 units for 2020, more than half the 1.03 million units sold in 2019.

           "The negative feedback travels all the way down the chain," a Indonesia-based induction furnace steelmaker said.
           "The weaker economy will see lesser demand of new vehicles, and when there're lesser automobile production going on, it causes fewer generation of scrap in the country," he said. "That then causes high premiums for scrap, and it's either you are rich enough to pay up, or you end up cutting down production."
           Indonesia's steel consumption in 2020 is expected to fall below 2015's level of 12.7 million mt from 15.9 million mt in 2019, data from The Indonesian Iron and Steel Industry Association showed.
Fresh COVID-19 wave hinders recovery
           The month-on-month recovery in July's vehicle and production volumes was mirrored by healthier regional demand for gasoline across ASEAN.
Driving activity in Indonesia and Thailand for example, stayed on an upward trajectory, as Thai driving activity in July averaged around 30% above baseline levels, akin to pre-pandemic levels, mobility data from Apple showed.
           Similarly, driving activity in Indonesia recorded higher month-on-month figures for July, between the levels of plus 20% and minus 10% around baseline levels, up from June's range of minus 30% to minus 10%, the data also showed.
Overall, ASEAN's total vehicle production and sales over January to July 2020 stood at 1.42 million units and 1.19 million units, respectively, down 42.1% and 40.1% year on year.

-- Clement Choo, Mark Tan, Samuel Chin
Source : Steel Business Briefing

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