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The impact of the rise of steel production capacity in Southeast Asia on the flow of global seaborne iron ore

Southeast Asia is located in southeastern Asia, including the Indochina Peninsula and the Malay Archipelago. There are 11 countries in total: Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia, Brunei, the Philippines, and Timor-Leste. Among them, steel production capacity is mainly distributed in Vietnam, Malaysia, Indonesia, Thailand, the Philippines, and Singapore, also known as the six ASEAN countries. Countries in Southeast Asia started relatively late in their economies, and their economic foundations are generally weak, especially the development of the steel industry is lagging behind. In recent years, with the continuous deepening of economic globalization and the continuous adjustment of the division of labor in the global industrial chain, factors such as cheap human resources in Southeast Asia have attracted a large number of investments, accelerating the industrialization process in the region and driving the continuous growth of the steel industry.

In addition, iron ore in Southeast Asia is mainly distributed in Vietnam, Laos, Myanmar, Indonesia, the Philippines and Malaysia, which also facilitates local steel production.

  • Current steel production capacity distribution

In 2022, the crude steel production capacity of the six ASEAN countries (Vietnam, Malaysia, Indonesia, Thailand, the Philippines, Singapore) will be 77 million tons, of which the electric furnace steel production capacity will be 41 million tons, and the converter steel production capacity will be 36 million tons, accounting for 53% and 36 million tons respectively. 47%. Specifically, Vietnam’s crude steel production capacity is the largest, reaching 27 million tons, accounting for 35% of the six ASEAN countries, followed by Malaysia and Indonesia, with production capacity of 17.3 million and 17 million tons, accounting for 22.5% and 22%.

In 2022, the six ASEAN countries (Vietnam, Malaysia, Indonesia, Thailand, the Philippines, Singapore) will produce 52.99 million tons of crude steel, accounting for 2.8% of the global crude steel production of 1.9 billion tons. Vietnam ranked first with 20 million tons, accounting for 38%, down 3.02 million tons from 2021.

  • Changes in steel production capacity in the future

In recent years, huge production capacity investment projects are pouring into the six ASEAN countries, mainly concentrated in Malaysia, Indonesia, the Philippines and Vietnam. According to Mysteel statistics, in the next 3-5 years, 15 new steel capacity projects in Southeast Asia are expected to be put into operation, involving a total capacity of 82.2 million tons, of which Malaysia will contribute the largest increase.

Based on this calculation, the crude steel production capacity of the six ASEAN countries is expected to reach 90 million tons in 2023, an increase of 56 million tons over 2011, an increase of 164.7%. Among them, the production capacity of electric furnace steel is 48 million tons, and that of converter steel is 42 million tons, accounting for 53% and 47%, respectively. Specifically, Vietnam’s crude steel production capacity is the largest, reaching 28.8 million tons, accounting for 32% of the six ASEAN countries, followed by Malaysia and Indonesia, with production capacity of 19.8 million and 18.9 million tons, accounting for 22% and 21%.

It is estimated that the crude steel production capacity of the six ASEAN countries will reach 140 million tons in 2026, of which the electric furnace steel production capacity will be 51 million tons, accounting for a further drop to 36%, while the converter steel production capacity will be 89 million tons, accounting for 64%.

  • The changing trend of iron ore trade flow in the future

At present, the iron and steel industry of the six ASEAN countries is still highly dependent on the international raw material market. The main sources of imported iron ore include Brazil and Australia, and most of them flow to Malaysia, Vietnam and Indonesia. Transshipment hub.

In the next three years, the converter steel production capacity of the six ASEAN countries will increase by 47 million tons, accounting for a significant increase in the proportion of crude steel production capacity, an increase of about 17 percentage points, which also means that the corresponding demand for iron ore will be greatly increased. The flow of iron ore trade will shift to the six ASEAN countries.

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Several steel mills have raised prices, predicting that steel prices will still rise

1. Futures and spot market prices of steel products

On July 20, the price of the domestic steel market rose mainly, and the black futures rose on the 20th, which boosted market confidence to a certain extent, and the spot steel market followed suit. Many domestic steel mills raised the price of construction steel products by 10-40 yuan/ton.

Hot-rolled coils: On July 20, the average price of 4.75mm hot-rolled coils in major cities in China was 3,921 yuan/ton, an increase of 17 yuan/ton from the previous trading day. This week, the output of hot-rolled coils increased slightly, and the inventory of steel mills and the social inventory were both declining. It can be seen that the demand side has improved slightly. The strong operation of raw materials is also one of the factors leading to price increases. The demand side in the later period is still relatively optimistic. On the whole, it is expected that the price of hot-rolled coils in China may fluctuate strongly in the short term.

Cold-rolled coils: On July 20, the average price of 1.0mm cold coils in major cities in China was 4,538 yuan/ton, an increase of 8 yuan/ton from the previous trading day. On the 20th, the black futures market fluctuated strongly, and market confidence was boosted to a certain extent. Most merchants raised their quotations slightly, but the actual transaction price had a certain room for discount. In terms of social inventory, the social inventory of cold-rolled coils was 1.2213 million tons, an increase of 20,800 tons week-on-week. On the whole, it is expected that the price of cold rolling may continue to be adjusted within a narrow range.

3. Steel market price forecast

On the supply side: This week, the output of the five major types of steel products was 9.3916 million tons, an increase of 65,800 tons week-on-week. Among them, the output of rebar, wire rod, hot-rolled coil and cold-rolled coil increased slightly, while the output of medium and heavy plate decreased slightly.

In terms of inventory: This week, the total inventory of steel products was 16.1942 million tons, an increase of 4,400 tons week-on-week. Among them, the inventory of steel mills was 4.5127 million tons, a decrease of 97,100 tons from the previous week; the social inventory was 11.6815 million tons, an increase of 101,500 tons from the previous week.

The demand for steel products in the off-season is unstable, the transaction of low-priced resources is acceptable, and the transaction of high-priced resources is difficult. At the same time, under the low profit status of steel mills, the output fluctuations are not large, and the inventory of raw materials and fuels remains low. Considering the tight supply of coking coal in some regions, the recent coking coal and coke markets have been operating relatively strongly, and the overall cost of steel has risen.

In short, under the high temperature and rainy off-season, the steel market maintains a weak balance between supply and demand, and there is little pressure on inventory accumulation. Driven by policies and costs, confidence in the steel market has recovered, and short-term steel prices may fluctuate slightly.

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Pickling Principle of HUNGTHAI Color Steel Coil China

Pickling is HUNGTHAI Metal’s one of the important steps in making cold rolled steel coil, we provide you with high quality cold rolled steel coil.

The scales of iron oxide formed on the surface of the strip are insoluble in water, and when they are immersed in acid or sprayed on the surface, they undergo a series of chemical reactions with the acid. Due to the loose, porous and cracked properties of the iron oxide scale on the surface of carbon structural steel or low-alloy steel, and the repeated bending of the iron oxide scale on the pickling unit, these pores and cracks are further increased and enlarged, so the acid solution is in contact with While the iron oxide scale reacts chemically, it also reacts with the steel through cracks. Therefore, the pickling principle can be summarized into the following four aspects.

1. Dissolution
Various paste oxides in the iron oxide scale on the surface of the strip are dissolved in the acid solution to generate ferric and ferrous chlorides or sulfates that can be dissolved in the acid solution, thereby removing the iron oxide scale from the surface of the strip. This effect is generally called dissolution.

2. Mechanical peeling effect
In addition to the various oxides of iron, the iron oxide scale on the surface of the strip is also mixed with some metallic iron, and the iron oxide scale is porous, so the acid solution can pass through the gaps in the iron oxide scale. and produce a lot of hydrogen. The expansion pressure generated by this part of the hydrogen can separate the iron oxide scale from the surface of the strip. We call this reaction mechanical exfoliation.

3. Osmosis
The acid solution enters through the gap of the iron oxide scale and reacts with FeO. Since FeO and Fe2O3 are easy to react with the operator, the phenomenon that the iron oxide scale falls off due to the dissolution of the lower FeO in the acid occurs. This phenomenon is called osmosis.

4. Reduction
When metallic iron reacts with acid, hydrogen atoms are first produced. Part of the hydrogen atoms combine with each other to form hydrogen molecules, which promotes the separation of the iron oxide scale. The other part of the hydrogen atoms reduces the oxides and salts of high-valent iron to low-valent iron oxides and salts that are easily soluble in acid solutions by virtue of their reducing power.

Hungthai metal have a complete quality supervision system and professional production equipment, and our goal is to provide all customers with the highest quality steel coils.

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In November, cold rolled steel coil showed a weak balance between supply and demand, and the price center may move down again

Overview: In October, the price of cold-rolled steel coils showed a fluctuating downward trend, with prices falling by 215 yuan/ton month-on-month. From an inventory point of view, the level of depot depots from factories and warehouses was average, and social depots increased slightly again, and the pressure to depot depots was prominent; from a supply perspective, most steel mills ended their annual maintenance in October and some areas were relaxed due to “power curtailment”, and supply rebounded slightly. ; From the current market research situation, in November cold-rolled steel coil demand is difficult to pick up, the price center of gravity may fall again.

Overall review of the international market for cold rolled coils

China’s cold-rolled steel coil export prices fell slightly in October, with a month-on-month drop of US$23/ton. From market feedback, in late October, affected by the decline in domestic prices, export quotations fell, and export prices fell to around 991 yuan/ton, but export prices were still at a high level. From the data point of view, with the rise of resources in India and the Commonwealth of Independent States, China’s refrigeration resources have recently regained some advantages. In addition, the epidemic situation in Southeast Asia has improved somewhat recently. Terminal production and work resumed relatively smoothly. Some merchants resumed the procurement of cold coils. It is expected that China’s cold coil exports will improve to a certain extent in the short term. It is expected that the export price in October will remain within USD 1,000/ton. , Showing an oscillating trend.

 Raw material exports of cold-rolled steel coils

According to customs statistics, in September, the export volume of cold-rolled thin steel sheets and cold-rolled thin-width steel coils was 616,700 tons, a month-on-month decrease of 22,400 tons and a year-on-year increase of 376,500 tons; from the expected data, exports in October The volume continued to decline month-on-month, but the rate of decline may be significantly narrowed, reflecting the rebound in overseas demand. It is expected that exports will stop falling and stabilize in November.

 The difference between cold and hot spreads and cold plating spreads fluctuates

 In October, the price difference between hot and cold expanded slightly. As of the end of October, the price difference between hot and cold was 807 yuan/ton, an increase of 153 yuan/ton month-on-month; the spread of cold plating was 269 yuan/ton, and the month-on-month decrease 34 yuan/ton. Judging from the recent market situation, hot-rolled prices have fallen sharply, while cold-rolled prices have fallen slowly. It is expected that the cold-hot spread and the cold-plated spread will continue to fluctuate in the range in November.

In terms of cost: According to market research, the profit of long-flow cold-rolling production enterprises is maintained at 450-600 yuan/ton. In the case of reasonable profits, long-flow cold-rolling production enterprises are more enthusiasm for production; independent steel rolling enterprises currently maintain profits At 150 yuan/ton, the price of hot-rolled steel coil has dropped significantly recently, while the price of cold-rolled steel has been relatively strong, and the price difference between cold and hot steel has remained at 700-800 yuan/ton. Therefore, independent steel rolling enterprises in November are still enthusiastic about production while costs are falling. .

In November, the overall supply and demand of cold-rolled rolling stocks showed a weak balance. Factory warehouses and social warehouses may continue to increase. The overall inventory of cold-rolled steel coils may show an increase in warehouses. In the case of consumption falling short of expectations, the overall market mentality is more pessimistic. In summary, the center of gravity of cold rolled prices in November may fall again.

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China cancels tax rebates for cold-rolled coil and hot-dipped galvanization, but exporters still have a chance to make ends meet

The government announced to cancel export tax rebates for some steel products, including cold-rolled coil and galvanized steel, which is bad news for many importers all over the world. However, the impact on Chinese suppliers may be temporary, and so far, the long-awaited export tariff has not yet been announced.

State Taxation Administration, Ministry of Finance of the People’s Republic of China on Thursday announced to cancel the export tax rebates for 23 steel products from August 1, 2021. The published list includes galvanized color-coated steel materials, tinplate, some steel rails, steel pipes for the oil and gas industry, and the most sensitive tax rebate is cold-rolled coil and galvanization. After the cancellation of export tax rebates for most other finished steels (including hot-rolled coil) in April, it is more attractive for many foreign buyers to import cold-rolled coil and galvanized steel from China, because cold-rolled coil is much cheaper than hot-rolled coil.

Officials claimed that the reason for this move was that the government intended to crack down on steel mills’ enthusiasm to further expand crude steel production and force them to focus on producing high-quality products. However, a Chinese trader said: “It seems that China does not like people who do steel business in this country.” And on July 29, another major trader said: “All our recently exported cold-rolled coils are at the buyer’s full risk, so we will not lose money now. But this will be a huge problem for our customers and the whole China.”

Most Chinese steel mills and traders have suspended the provision of cold-rolled coil and galvanized steel in the international market, because they need time to ask for information. Some suppliers facing external markets have increased their quotations of cold-rolled coil and galvanized steel by $50 and $30 per ton from last week’s prices, and to $980-$1000 FOB and $1010-$1030 FOB per ton respectively. Nevertheless, a major Chinese state trader said: “It seems that we can still export our products, because Japan’s cold-rolled coil is still about $60 per ton more expensive than China, and our galvanized steel is $120 per ton cheaper than India.” “I am not sure about all foreign markets, but South America will definitely be our big customers due to few choices,” another trader expressed his opinion. The head of the export department of a large Chinese steel company said: “The United States and the European Union will suffer the most, because they will have to accept higher prices from Taiwan, Vietnam and other countries and regions after China cancels the tax rebates.”

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