Boston, MA -- (ReleaseWire) -- 01/08/2013 -- BMI's Taiwan Metals Report for Q4 2012 examines how Taiwanese steelmakers are responding to the downturn in the Chinese market and warns that operating margins will remain under threat even if volumes start increasing.
The Taiwanese steel industry is bearing the full brunt of the slowdown in Asian markets with the worst performance in the region so far this year. Taiwanese crude steel production volumes fell 6.3% y-o-y to 12.48mnt in the first seven months of 2012. During the same period, Taiwan's manufacturing output fell 2.8% y-o-y, while the output of basic metals declined 5.3% and fabricated metal products fell 4.0%. Meanwhile, in the first eight months of the year, Taiwan's export value of iron and steel and articles made from iron and steel decreased by 7.1% y-o-y while the import value fell 14.5% y-o-y. While order volumes may increase in Q412, lower prices mean little change is expected in bottom lines.
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Efforts are underway to improve the competitiveness of the Taiwanese steel industry. The China Steel Corporation (CSC) is looking to improve profitability in an increasingly difficult market environment. CSC is Taiwan's largest steelmaker, with over 50% of the domestic market. With this in mind it is undertaking reconstruction of its continuous annealing line, which is expected to help produce better products with lower costs and using less electricity.
BMI reports the following forecasts/views:
- The trend year-to-date supports BMI's forecast of a 4% decline in output to 21.8mnt for the 2012 full year. The downturn in the steel industry is directly related to the fall in orders from China as well as declining domestic manufacturing production.
- The recovery will be slow in 2013 with growth of just 1.5% led by demand for flat products while long products continue to feel the effects of the bursting of the mainland Chinese housing bubble. Going forward capacity expansion and a focus on increasing product value and efficiency savings should support growth and improve profitability.
- CSC is set to increase its production capacity from 12.5millionn tonnes per annum (tpa) to 15mn tpa by the beginning of 2013 as the company completes the expansion of its wholly-owned subsidiary, Dragon Steel. Given our negative view on the Chinese economy, it remains to be seen whether CSC will be able to profitably utilise the additional capacity.
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