Steel Demand Expected to Surge On Back of Government and High-Tech Spending

Steel makers in Taiwan are gearing up for an expected boom in demand, due mainly to trillions of dollars worth of government construction projects and the ambitious expansion of private-sector flat-panel display production facilities.

The Executive Yuan, or Cabinet, has drawn up a plan to spend around NT$3 trillion (US$88 billion at NT$34:US$1) on programs designed to boost the island's economy during the 2003-2006 period.

This plan has two major parts: improvement of infrastructure and development of emerging industries. The first part contains such projects as the high-speed railway and related construction work at a cost of NT$510 billion (US$15 billion), mass rapid transit system projects in Taipei and Kaohsiung at a combined cost of NT$349 billion (US$10.2 billion), new harbor and airport construction costing NT$307 billion (US$9 billion), and improvement of the freeway system in western Taiwan.

The second part of the plan encompasses biotechnology, chip design, telecommunications, and new energy sources. The government will invest money in these areas with the aim of boosting Taiwan's competitiveness in the international market.

Local industry insiders say that the government's construction plans will mainly benefit producers of steel structures and deformed bars. The expansion of flat-panel display production will bring lucrative profits to the island's suppliers of steel structures and H beams.

H.J. Chen, vice president in charge of sales at China Steel Corp., comments that the government's projects will require large quantities of hot- and cold-rolled steel in addition to deformed bars, beams, pipes, and sheets.

President Su Hsuan of China Steel Structure Co. notes that the construction and expansion projects will require considerable quantities of steel structures, and that his company is watching the market closely.


Government Structures


W.H. Lai, president of Century Iron & Steel Industrial Co., predicts that a total of 400,000 to 500,000 metric tons of steel structures with a value of about NT$10 billion (US$285.7 million) will be needed for TFT-LCD production and government construction projects over the next few years.

All of Taiwan's six largest TFT-LCD suppliers--Toppoly Optoelectronics Corp, Chunghwa Picture Tubes Ltd., Chi Mei Optoelectronics Corp., AU Optronics, Hann Star Display Corp., and Quanta Display Inc.--have instituted plans for sixth- and seventh-generation factories. Lai estimates that one of these projects alone, that of AU Optronics, will require at least 120,000 metric tons of steel structures. He also expects around 60,000 metric tons of steel structures will go into each of the stations along the Taipei MRT system's Nankang line.

Huang Chin-hwa, president of Kuei Yi Industrial Co., reports that orders for his steel beams rose over 10% last month compared with the average monthly figure for the first half of the year.

Deform-bar suppliers, including Tung Ho Steel Enterprise Co., Feng Hsin Iron & Steel Co., and Chih I Enterprise Co., all expect that the government's programs will bring significant business opportunities in the future.

Hit by a price collapse in the world steel market in 2001 before making a modest recovery last year, Taiwan's steel makers think that the anticipated rise in demand will further bolster the prices of their products. Global steel prices hit a 20-year low in 2001, thanks largely to overcapacity, and then began climbing upward again after several world-class producers either shuttered their operations or scaled back on production.

The price of middle-grade bars now stands at an average of NT$10,800 (US$317) per metric ton, and steel structures cost around NT$13,000 (US$382) and NT$14,000 (US$411) per ton.