Steel Industry to Profit from China's Urbanization Plan

With China moving to urbanize its rural and remote areas nationwide starting this year to trigger tremendous market demand for steel, Taiwanese steelmakers are very likely to enjoy this huge business pie in the years to come.

According to insiders, China has just kicked off its urbanization plan as part of its economic stimulus, which will involve up to RMB4 trillion (about NT$20 trillion or US$666.6 billion) in investment. Based on steel amounting to a 20% share of construction costs, the ambitious plan will generate considerable business chances roughly worth RMB800 billion for steelmakers to exploit.

Additional good news for steelmakers interested in exploring the lucrative market is that in the meantime China has started several infrastructure and civil construction projects and still has more on table to launched later, which are estimated to totally call for RMB200 billion in budget to carry out. In the scenario, to say that the country's domestic steel market will be key to reviving Taiwan's steelmakers' anemic performance seen last year is not overstated.

Market observers said that after China puts the abovementioned plans into action, nearly all kinds of steels and steel-made products will be heavily needed for construction of railways, roads, airports, apartments and other large-sized buildings in the country, which include cold-rolled steel, hot-rolled steel, galvanized steel, pre-painted steel, steel plates, I-beam steel, steel columns, steel tubes, steel wires, screws, nuts, stainless steel, and so forth. In other words, Taiwanese suppliers throughout the industry and their downstream customers will be able to share the market pie, especially those with manufacturing bases in the country.

Among Taiwanese steelmakers, China Steel Corp. and its subsidiaries will be the biggest beneficiaries of the takeoff of the Chinese market for steel.

China Steel, the largest company of this kind in Taiwan by both revenue and output and with 30% of its overall exports from China and Hong Kong now, pointed out that China's booming market for steel will help not just jack up its sales in the country, but also profit itself in the global competition against Chinese steelmakers, primarily because once domestic demand gets stronger, its Chinese counterparts will have to allocate more output to the local market, which, in turn, will allow Taiwanese suppliers a precious chance to globally win export orders originally going to China.

The steelmaker's subsidiary China Steel Structure Co., Ltd., which presently runs a factory in Kunshan in China's southeastern province of Jiangsu, commented that its received orders for steel structures will surely soar to drive up its revenue and profits in the short term as the Chinese government gears up on domestic infrastructure development.

Coincidentally, Yieh Phui Enterprise Co. Ltd., and Sheng Yu Steel Co., Ltd., both large-sized suppliers of coated steel products and operating a factory in Jiangsu and Guangdong, respectively, also hail a 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 plans for high-speed railways and other infrastructure, for the Taiwanese veteran producer has built a complete product lineup and sound distribution network in the country, and has obtained international certificates for its special fasteners used in high-speed railways.