New Report on Taiwan Metals Report Q2 2012 added to MarketReportsOnline.com
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New Report on Taiwan Metals Report Q2 2012 added to MarketReportsOnline.com

Dallas : TX : USA | Jun 26, 2012 at 3:12 AM PDT
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The Taiwanese steel industry is bracing itself for a year of contraction in output as it faces increasingly hostile domestic and regional market trends, according to BMI’s latest Taiwan Metals Report. Taiwan's output of basic metals rose by 5.3% year-on-year (y-o-y) in 2011 while its fabricated metal products output grew by 8.4% on the back of a 12.9% y-o-y rise in the value of exports to US$30.65bn. Taiwanese crude steel production grew 15.4% y-o-y to 22.66mn tonnes (mnt) in 2011, with the World Steel Association (WSA) revising up its estimates.

The outcome was higher than the 22.4mnt BMI forecast in the previous quarterly report. Output was assisted by healthy export orders. The value of basic metal and metal product export orders rose 12.9% y-o-y to US$30.65bn in 2011, according to data from the Taiwan Ministry of Economic Affairs. However, Taiwan’s leading steelmaker, China Steel Corporation (CSC), reported output of 8.7mnt in 2011, down 9.9% y-o-y, while its sales volume reached TWD234.4bn (US$7.8bn), up 8.8% y-o-y.

The industry is operating at around 85% full capacity with plenty of room for growth. Although growth was better than expected in H211, we believe that the inevitable contraction has simply been delayed rather than averted. In the first two months of 2012, crude steel output fell 3.7% y-o-y. Recently released economic data reaffirm our forecast of a deceleration of Taiwan’s economy. After slipping into a technical recession in Q411, we believe that Taiwan's economy is set to face further weakness, especially in the first half of 2012. Stemming primarily from a deterioration in the high-tech sector, we expect exports and investment weakness to be the main drags on growth. Consequently, we are revising our 2012 real GDP growth forecasts down to 2.4% from 3.4% previously, which still remains below recently revised government and Bloomberg estimates of 3.9% and 4.0% respectively.

With our outlook on Taiwan's main trading partners – China, the US and Japan – remaining subdued, we caution that there will be a significant slowdown in Taiwan's steel industry in coming months with output likely to decline 4% to 21.75mnt in 2012. BMI forecasts domestic finished steel consumption falling 11% y-o-y to 16.64mnt in 2012 while steel exports will decline 6% to 10.34mnt in the same year.

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Given the close interlocking nature and dependence of Taiwanese exports on China, this chimes in with the fact that China's economy also slowed. Our expectations are grounded on the basis that external demand conditions are likely to deteriorate further in 2012, dragging down exports and the broader economy. The outlook for the island's manufacturing sector continues to look bleak amid a deterioration in business conditions. Metals consumption in general will weaken as a result of stagnation and contraction in the country’s manufacturing sector.

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charlesmartin173 is based in Dallas, Texas, United States of America, and is a Reporter on Allvoices.
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