Vietnam, Indonesia to add large steel capacities

Southeast Asian economies Vietnam and Indonesia will add several million tonnes of steel capacity over the next few years as they seek to curb steel imports amid projections of strong medium-term demand growth.

Indonesia is leading the southeast Asian region in terms of new projects commissioned and under construction this year, with Vietnam being the only other country with significant capacity expansion, according to presentations made by country steel associations at the Southeast Asia Iron and Steel Conference in Thailand last week.

Indonesia's state-run Cilegon-based Krakatau Steel started operating a greenfield blast furnace with 1.5mn t/yr of capacity this year, while a 1mn t/yr blast furnace is under construction at PT Gunung group's steel mill in west Java.

Construction is ongoing at a 3.5mn t/yr blast furnace at China-based Delong Steel's greenfield plant in central Sulawesi, which will also have rebar, wire-rod and billet mills.

Chinese steel group Hebei Bishi is expected to start construction of a 3mn t/yr steel mill in central Java either this or next year, according to the Indonesian Iron and Steel Association.

The country is expected to post a 6pc growth in steel demand in 2019, following an 11pc increase in consumption to 15.1mn t in 2018. The association expects increased domestic capacities to help stem the flow of imports, which were at 7.6mn t in 2018.

Vietnam's steel capacity increases will come from private enterprises. An Hung Tuong is expected to complete building 1mn t/yr of additional steel capacity by June 2019 and add 500,000 t/yr by 2020 at two plants in Nghi Son port and Thanh Hoa city, respectively.

Hoa Phat will add 1mn t/yr of capacity at its Quang Ngai mill by June-July 2019 and start operating a 2mn t/yr hot-rolled coil (HRC) mill by the end of 2020. Nam Thuan has added 300,000 t/yr of steelmaking capacity this month, while Sunpro will start a 500,000 t/yr steel mill in 2019-20.

Vietnam expects its steel production to grow by 8-10pc on the year each in 2019 and 2020. Crude steel output grew by around 16pc to 15.47mn t in 2018, while imports were at 20mn t. The country is among the world's largest importers of HRC. Argus assesses the cfr Vietnam HRC price daily, along with the fob China HRC price. China is the largest exporter of steel into Vietnam.