Time to move up
Asian steelmakers should focus on innovation and value-added products to combat a possible influx of cheap steel diverted from the United States if Washington imposes anti-dumping duties on steel imports from Asia, industry executives say.
If the US, the world's largest steel importer, tightens its rules, other countries could follow suit and that protectionist trend would adversely affect free trade globally, said Rajiv Mangal, the president and CEO of Tata Steel Thailand Plc (TSTH).
As well, steel that is supposed to go to the US may be diverted to other locations where there is good demand. "Some of it might flow into Asean because Asean is today one of the biggest and fastest-growing steel consumers in the world," Mr Mangal told Asia Focus.
That could indirectly affect regional sales of TSTH, which does not export any steel to the US.
TSTH is a subsidiary of the India's Tata Steel, which is among the top 10 global steel companies with annual crude steel capacity of 28 million tonnes and operations in 26 countries. The Thai unit has a capacity of 1.7 million tonnes.
"China is the largest [steel] exporter in the world, maybe not to the US, but if US measures are implemented and if Europe started to look at some measures, then obviously it will have an impact on China," said Mr Mangal.
Japan and South Korea, the second and third largest exporters of steel, could feel indirect impacts, he added.
"If the [US] measures affect a large volume of steel and these countries do not cut production then steel prices in the region and the world market will definitely drop because of the import pressure," he said.
JFE Steel, Japan's second-largest steelmaker, has announced plans to raise output this year by 3%, citing a demand recovery. JSW Steel, India's largest steelmaker, is planning two plants of 10 million tonnes each in Odisha and Jharkhand in its drive to more than double in size to 40 million tonnes by 2030.
"There is pressure on steel manufacturing companies and Asean countries because of a very high volume of imports from China, and countries such as Vietnam, Malaysia, Indonesia and Thailand have already announced many anti-dumping measures in the last two or three years," Mr Mangal noted.
"Between January and October 2016, 16 anti-dumping cases were taken up, of which 14 were related to China. Chinese steel is a reality that each company in each country has to look at for ways and means, both in terms of internal improvement and working with governments to see if there are fair tariff and non-tariff measures that could be introduced," he added.
Vikrom Wacharkrup, chairman of the Iron and Steel Industry Club at the Federation of Thai Industries (FTI), recommended that Asean steelmakers do more to create value-added products to counter the flood of cheap downstream goods from major dumpers in Asia.
"Steel products are only used once they are processed, such as in the construction industry, so steelmakers have to make products that are closer to the users," he said.
For example, he said, a steel rod can be bent and cut in a way that makes it convenient for construction workers to use, or a steel sheet can be fabricated to add value. "If we do this, then we will be able to exist for longer and we'll be less worried about products that are being dumped into our country because the distribution network is well taken care of."
Japan, even with its close proximity to China, is still able to sell steel products at good prices because its producers add value and provide extra services to customers.
"I don't think the sky is falling just because an executive order was issued," Nippon Steel chairman Kosei Shindo said following President Donald Trump's announcement of the investigation into steel imports.
Nippon Steel & Sumitomo Metal, Japan's largest steelmaker, uses a local production strategy to combat dumping from China. It has a plant in Kentucky near a Toyota facility, and also makes steel sheet in Indiana. It also acquired AM/NS Calvert in Alabama to produce steel sheet for Japanese automakers there.
Nippon Steel makes 6.8 million tonnes of steel in the US, compared to the less than 1 million tonnes it exports there from Japan. Most of the products it exports are hard to find, such as oil exploration pipe that can withstand high pressure and acidic environments 3,000 metres underground. JFE Steel, meanwhile, acquired California Steel Industries in the 1980s and is now building a plant with Nucor, the largest US steelmaker, in Mexico.
"Steelmakers in Asean have to think of selling services instead of only selling commodities," said Mr Vikrom. "If the products that are being sold in the country and imported are exactly the same, then the only thing you can talk about is pricing."
Mr Mangal said TSTH would continue to offer valued-added products that are "not easily susceptible to imports" and more services in order to counter cheap steel.
"We are currently the only maker of quake-resistant rebar and the largest manufacturer of cut-and-bend products that are made at the factory and directly delivered to the [construction] site," he said.
The German metals company Klöckner, meanwhile, is moving forward with digitisation to create a sustainable future in a tough market. "Because of oversupply, especially from China, there will not be a recovery, in my point of view, anytime soon. It will take years, maybe five years, maybe even ten years," CEO Gisbert Rühl said in May 2016.
Klöckner, Europe's largest distributor of steel, is building an internet service platform that integrates suppliers such as big steel producers on the one side and customers on the other. It aims for 50% of all transactions to go through this proprietary platform by 2019.
Its German peer Trumpf, one of the world's biggest providers of machine tools, in 2015 introduced the online service Axoom. It connects machines built by Trumpf and others, and uses the data collected to help customers organise production, such as warning them when they are running out of material.
Nippon Steel is currently implementing more advanced production control systems, while analysing big data to improve production efficiency and quality. It is also applying digital technology to logistics, raw material procurement and sales and marketing systems.
Germany's National Academy of Science and Engineering (Acatech) said making products and factories "smart" is only the first stage of digitisation. The next step is to use the data generated by connected devices to offer clever services, and make money with new business models.