Southeast Asia Automobile Demand Spurring Regional Steel Development

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--The general global automotive industry has felt the pressure of the world economic crisis acutely. Consumer buying was down across the board last year, even in Asia, where countries like China and India have experienced rapid economic growth. In contrast, Indonesia and Thailand are at the forefront of the developing Southeast Asia automobile market, representing the largest demand in Asia.

Thailand's car sales were up 58% year-on-year for March. Indonesia car sales have also risen this year, with February seeing a 25% hike year-on-year. Car output in Thailand alone is expected to increase 150% within the next few years. Not only has Southeast Asia's demand for automobiles become palpable, the market region has become a base for automotive manufacture. Companies like Nissan Motors Company Limited (TYO:7021) (Yokohama, Japan) and Toyota Motors Corporation (TYO:7203) (Toyota, Japan) are both looking to expand existing production sites in Thailand to cope with demand there.

A rise in automotive production will also prompt a rise in sheet steel production as well as an increase in steel galvanizing facilities. Sheet steel is galvanized prior to shaping at automobile factories. Several large steel facilities have been completed or are currently under construction in multiple countries, including Thailand, Vietnam and Malaysia that will devote some, if not all, production to the automotive industry.

JFE Steel Corporation, subsidiary of JFE Holdings Incorporated (TYO:5411) (Tokyo), and Nippon Steel Corporation (TYO:5401) (Tokyo) are currently increasing their presence in Southeast Asia, specifically Thailand. JFE Steel's new 400,000-tons per year steel galvanizing mill is currently under construction and Nippon Steel is planning to commence construction on its new galvanizing mill next month. Both companies are looking to provide galvanized steel to Japanese automakers, like Nissan and Toyota, in the region. The influx of Japanese industry in Southeast Asia could increase sharply over the next two years. Many industrialists fear that Japan faces an exodus of manufacturers due to Japan's poor economy and the Great East Japan Earthquake Disaster.

Industrial Info is currently tracking approximately $30 billion in Southeast Asia steel projects, 29% of which are currently under construction.

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