Taiwan's Iron and Steel Industry Expected to Continue Growing

Taiwan's iron and steel industry will continue to grow through 2010, according to the speakers at a seminar held by the Industrial Technology Intelligence Services (ITIS) office of the Ministry of Economic Affairs (MOEA) on Nov. 22. The speakers included Chen Chien-jen, senior industry consultant at ITIS; Liu Wen-hai, ITIS project manager; and Huang Chin-chuan, deputy director of the metal research and development department of the government-backed Metal Industries Research & Development Centre (MIRDC).

At the seminar, which was dubbed "The Iron/Steel and Non-ferrous Metal Industry: Past Performance and Future Prospects," the three speakers analyzed the development of the iron and steel industry, light-metal industry, and alloy and steel manufacturing equipment industries.

Thanks to the rapid growth in demand from mainland China, the consolidation of steel manufacturers around the world, and the shut-down of inefficient plants in China, the global iron and steel industry has enjoyed unprecedented expansion of both production and revenue ever since 2002. The seminar speakers expect the good times to continue through 2010.

Chen Chien-jen estimated that global demand for steel materials would reach 1.198 billion metric tons in 2007, up 6.8% from the year before, and would further increase to 1.279 billion metric tons in 2008, up another 6.8%. Beating that average growth will be India, China, Saudi Arabia, Iran, Russia, Turkey, and Brazil, with the first four countries scoring an increase of more than 10%.

M&As Help the Industry Grow

Mergers and acquisitions, which were once closely related to corporate failures, have gone transnational and become more closely connected to the industry's improved outlook. Transnational M&As have also expanded from their past concentration on large mills in Europe and North America to encompass medium-sized and small mills in the Asia-Pacific, the Middle East, and Latin America.

The short-term development of the industry worldwide has also been affected by the equitable control of capacity expansion and the implementation of cuts in carbon dioxide emissions under the Kyoto Protocol.

Global production of crude steel amounted to 1.435 billion metric tons in 2006 and is expected to reach 1.543 billion metric tons in 2009. Making the biggest contribution to the growth will be China, with the expected addition of 45.65 million tons, followed by India with 17.47 million tons, Brazil with 7.1 million tons, Russia with 6.5 million tons, and the U.S. with 5 million tons. But the overall increase in capacity will lag far behind the growth in demand, leading to improved equipment utilization in the industry.

In the light-metal industry, such materials as aluminum, magnesium, and titanium have the widest range of applications. Liu Wen-hai of ITIS said that Taiwan's aluminum industry reached a peak production value of NT$75.5 billion (US$2.33 billion in 1997 before it began to slump because of the exodus of manufacturers in a variety of industries.

The price of aluminum has been rising in recent years, however, because of increased demand by the 3C (computers, communications, and consumer electronics) industry, and Taiwan's total production of aluminum in 2007 is estimated to have climbed back up to NT$74 billion (US$2.29 billion).

Liu noted that light metals have been widely used in the defense, aerospace, and energy industries in the past, and that in recent years their applications have expanded rapidly in response to the needs for energy conservation, reduction of gas emissions, resource recycling, and clean production. Domestic manufacturers of 3C products, bicycles, and sports and recreational equipment, for example, have adopted the use of large quantities of light metal in their manufacturing processes, and the use of light metals will soon expand into the automobile and motorcycle sectors as well.

Local manufacturers are capable of turning out high-end aluminum sheets to replace imported aluminum, which cost the island NT$17.1 billion (US$529.41 million) in the first three quarters of 2007. During the same period, Taiwan exported NT$16.3 billion (US$504.64 million) and NT$26.2 billion (US$811.14 million) worth of aluminum materials and products, respectively. Exports are expected to increase, partly because of increased demand from Vietnam and India.

Migration Blues

Taiwan's magnesium-forming industry was born in 1998 and developed rapidly to a peak in 2004, after which it has been on the wane because makers of cast aluminum have followed 3C manufacturers offshore.

According to ITIS statistics, Taiwan consumed approximately 3,000 metric tons of magnesium alloy in the first half of 2007 and the total was expected to be less than 6,000 tons for the whole year, down 10% from 2006. Local magnesium alloy manufacturers sell most of their products to automobile, bicycle parts, and power-tool housing producers.

Thanks to the booming development of titanium golf-head manufacturing, Taiwan's titanium-alloy industry reached a peak production value of NT$8.3 billion (US$256.96 million) in 2005. Production has declined over the past two years as the demand for golf heads has shrunk, however, and 2007 production is estimated at only NT$5.5 billion (US$170.27 million).

The island's aluminum-alloy industry enjoys the advantages of superior manufacturing processes and R&D capabilities, and the MOEA's Department of Industrial Technology is urging manufacturers in the line to recover their rapid growth by developing high-value-added and tailor-made products for the aerospace, chemical, construction, automobile and motorcycle, bicycle, biotechnology, and consumer product industries.

The MIRDC reported that the island's base-metal industry currently has an annual production value of NT$900 billion (US$27.86 billion), and continuous investment is expected to boost that figure to NT$1 trillion (US$30.95 billion) in the near future.