Taiwan's Steel Industry to Benefit from China's Urbanization Plan
2013/02/18 | By Steve ChuangWith China moving to urbanize rural and remote areas starting this year, the policy will likely trigger tremendous demand for steel to benefit Taiwanese steelmakers in the future.
According to insiders, China has just kicked off its urbanization plan as part of its economic stimulus program, to involve up to RMB4 trillion (about NT$20 trillion or US$666.6 billion) in investment. Based on steel making up a 20% share of construction costs, the ambitious plan will generate roughly business potential of RMB800 billion for steelmakers.
Taiwan's steelmakers interested in exploring the lucrative Chinese market are blessed with more good news. China has started several infrastructural and public works projects and still has more to be launched later, which call for a budget of estimated RMB200 billion. So to say that China's steel market will be key to reviving Taiwan's steelmakers' anemic performance last year is not an overstatement.
All-round Demand
Market observers say that after China implements the abovementioned plans, nearly all kinds of steel and steel products will be in heavy demand for constructions of railways, roads, airports, apartments and other larger buildings, including cold-rolled steel, hot-rolled steel, galvanized steel, pre-painted steel, steel plates, steel I-beams, columns, tubes, wires, fasteners, stainless steel, and so forth. In other words, Taiwanese suppliers along the entire supply chain and downstream customers will share the market, especially those with manufacturing bases in China.
Among Taiwanese steelmakers, China Steel Corp. and its subsidiaries will be the biggest beneficiaries of the takeoff in the Chinese steel market.
China Steel, the largest steelmaker in Taiwan by revenue and output with 30% of its overall exports to China and Hong Kong, says that China's booming market for steel will not only push up sales in the country, but also enhance its competitiveness against Chinese steelmakers, primarily because Chinese counterparts will have to allocate more capacity to meet local demand, which, in turn, will allow more room for Taiwanese suppliers to win global export orders originally going to China.
China Steel's subsidiary China Steel Structure Co., Ltd., with a plant in Kunshan in China's southeastern province of Jiangsu, says that orders for steel structures will surely soar to drive up revenue and profits in the short term as the Chinese government sets in motion infrastructural development.
Yieh Phui Enterprise Co. Ltd., and Sheng Yu Steel Co., Ltd., both large-sized suppliers of coated steel products with factory in Jiangsu and Guangdong, respectively, also predict bright future riding on China's urbanization plans.
Among fastener makers, Chun Yu Works & Co., Ltd. is the most likely to achieve bigger sales gains when China kicks off construction of high-speed railways and other infrastructures, for the veteran Taiwanese producer has built a complete product lineup and sound distribution network in the country, backed by internationally certified special fasteners for high-speed railways.
Lackluster Performance of Listed Taiwanese Steel and Steel Product Suppliers in 2012 | ||||
Company | Jan.-Nov. Revenue | YoY Growth Rate | Earnings per Share (as of end of Q3) | Main Products |
China Steel Corp. | NT$191.953 bn. | -13.56% | NT$0.25 | Steel plates, galvanized steel plates, steel coils, wire rods, etc. |
Chun Yu Works & Co., Ltd. | NT$3.554 bn. | -14.95% | - NT$0.24 | Fasteners |
China Steel Structure Co., ltd. | NT$13.145 bn. | 6.68% | NT$2.03 | Steel columns, I-beam steels, steel structures |
Chung Hung Steel Corporation | NT$38.153 bn. | -10.02% | - NT$2.12 | Hot- and cold-rolled steel coils, steel pipes |
Mayer Steel Pipe Corp. | NT$4.537 bn. | -9.91% | NT$0.30 | Steel pipes |
Yieh Phui Enterprise Co. Ltd. | NT$25.348 bn. | -16.47% | - NT$0.53 | Coated steel plates, coated steel coils |
Wei Chih Steel Industrial Co., Ltd. | NT$9.016 bn. | -10.81% | - NT$0.38 | Steel rolling, steel billets, steel bars |
Hai Kwang Enterprise Corporation | NT$11.873 bn. | -9.82% | - NT$0.03 | Steel bars, steel billets |
Tang Eng Iorn Works Co., Ltd. | NT$14.749 bn. | -21.89% | - NT$1.12 | Stainless steel |