Future looks bright for Taiwan steel

Research and Markets says that in the first eight months of 2011 Taiwan's crude steel output was up 10.0% year-on-year (y-o-y) to 14.23mn tonnes with a strengthening of volume going into Q311. This puts it on course for output of 21.62mn tonnes, 1.18mn tonnes higher than what the company forecasted in the previous quarter.

"We have also revised up our hot-rolled output from 22.21mn tonnes to 24.92mn tonnes, with growth of 8.0% y-o-y. The industry is operating at around 85% of full capacity with plenty of room for growth," states Research and Markets.

However, recent economic data reaffirm our call for a deceleration of Taiwan’s economy. Not only did Q211 GDP growth come in at 4.9% (down from 6.4% in Q111), but industrial output and export orders also followed a worsening trend across the quarter. With our outlook on Taiwan’s main trading partners - China, the U.S. and Japan - remaining subdued, Research and Markets caution that there will be a significant slowdown in Taiwan’s economic growth in the coming months, and we cannot rule out a collapse in 2012. We expect headline real GDP growth to remain at 4.3% in 2012, unchanged from 2011, putting us below the consensus of 5.2% and 5.0% in 2011 and 2012 respectively.

However, it's expected long steel to be supported by the government’s multibillion dollar projects in the transport and energy infrastructure subsectors. Added to this is the effect of the post-tsunami reconstruction effort in Japan, which should help to tighten the Asian market over the medium-term and offset any slowdown in Chinese consumption growth.