Boston, MA -- (SBWIRE) -- 02/15/2013 -- BMI's Taiwan Metals Report for Q1 2013 looks at domestic infrastructure spending in Taiwan and how this will affect the prospects of the country's steel makers in 2013. We expect a stronger 2013 for the industry after a very weak 2012.

The Taiwanese steel industry is bearing the full brunt of the slowdown in Asian markets with the worst performance in the region so far this year. Taiwanese crude steel production volumes fell 9.8% year-onyear (y-o-y) to 17mnt (million tonnes) in the first 10 months of 2012. The industry was not only dealt volume decreases but also price declines given how steel prices in the region performed during the latter half of 2012.

Efforts are underway to improve the competitiveness of the Taiwanese steel industry. The China Steel Corporation (CSC) is looking to improve profitability in an increasingly difficult market environment. CSC is Taiwan's largest steelmaker, with over 50% of the domestic market. With this in mind it is undertaking reconstruction of its continuous annealing line, which is expected to help produce better products with lower costs and using less electricity.

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BMI reports the following forecasts/views:

- The trend year-to-date supports BMI's forecast of a 7% decline in output to 21mnt for the 2012 full year. The downturn in the steel industry is directly related to the fall in orders from China as well as declining domestic manufacturing production.
- Taiwan's steel industry will recover from in 2013 with growth of around 5% as domestic infrastructure spending will serve to soak up demand. Capacity expansion and a focus on increasing product value and efficiency savings should support growth and improve profitability.
- CSC is set to increase its production capacity from 12.5mn tonnes per annum (mntpa) to 15mntpa by the beginning of 2013 as the company completes the expansion of its wholly owned subsidiary, Dragon Steel. Given our negative view on the Chinese economy, it remains to be seen whether CSC will be able to profitably utilise the additional capacity.

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