Cambodia’s “Steel Demand” is Expect to Continue to Grow

(Article source: China Metallurgical News)

 

The General Administration of Customs of Cambodia recently released a report that in the first four months of this year, Cambodia’s total steel imports reached US$129.04 million, accounting for 1.63% of Cambodia’s total imports, an increase of 7.78% year-on-year. More relevant data show that Cambodia’s apparent steel consumption (ASU) is 450,000 tons in 2019 and 270,000 tons in 2020. However, some scholars believe that the above-mentioned apparent consumption is lower than the actual data of the country.

 

Cambodia joined ASEAN in 1999, and its protracted civil war made it the last country in Southeast Asia to join ASEAN. After Cambodia achieved political stability at the end of the last world, it began to pay more attention to the country’s economic development. In recent years, although Cambodia’s economy has maintained steady growth, the country is still one of the least developed countries in ASEAN. Cambodia’s total GDP ranks third from the bottom among ASEAN countries, contributing less than 1% to ASEAN’s total GDP, and its per capita GDP is the lowest among ASEAN countries.

 

In 2021, Cambodia’s total population will be 16.95 million, accounting for about 2.5% of the total population of ASEAN. In recent years, Cambodia’s working-age population has continued to increase, and the country is still in the early stages of a demographic dividend. It can be expected that Cambodia’s young population gradually entering the labor market is expected to help the country’s industrial development and promote economic growth.

 

In Cambodia, the steel industry is not an important industry. According to Yos Monirath, Director-General of the Mining Bureau of the Ministry of Mines and Energy of Cambodia, there are currently three steel production plants in Cambodia that produce finished steel by recycling metal waste, namely Hongdesheng (Cambodia) Steel Co., Ltd. ( 500,000 tons per year of straight and coiled steel bars and wire rods), General Steel International (Cambodia) Co., Ltd., and another company whose official name is unknown.

 

The construction industry is the largest steel consumption industry in Cambodia.

 

Construction, garment manufacturing, tourism and agriculture are the four key industries supporting Cambodia’s economic growth. Among them, the industry with the largest steel consumption in Cambodia is the construction industry.

 

In recent years, Cambodia’s infrastructure construction has advanced rapidly. Although it has slowed down for a while, many major projects are still advancing as planned. The Cambodian government believes that in the process of economic development, it is very important to improve the logistics system and strengthen the construction of the transportation industry. Cambodia is actively building roads. From 2005 to 2020, the total length of its roads has more than doubled, reaching 64,883 kilometers in 2020. In recent years, Cambodia’s infrastructure construction funds have come from investment related to the “Belt and Road” initiative on the one hand, and related investment support from the World Bank, Asian Development Bank, and Japan, South Korea, Thailand, and Vietnam on the other hand.

 

At present, Cambodia is politically stable, has a large young labor force, and has signed several regional and sub-regional trade agreements, creating favorable investment conditions. These conditions have increased Cambodia’s attractiveness for foreign direct investment, thereby boosting the development of its steel and related industries.

 

According to Cambodia’s “2015-2025 Industrial Development Policy” and “2021-2023 Economic Recovery Plan”, the automobile industry has been identified as a priority industry for Cambodia to help Cambodia achieve economic recovery and long-term economic growth after the epidemic. It is reported that Cambodia’s automotive industry development roadmap has been drafted and is being discussed and reviewed by stakeholders and investors who support the draft.

 

The National Trade Administration of the US Department of Commerce believes that the auto parts industry is the industry with the best development prospects in Cambodia. The industry is growing and attracting tier one auto parts suppliers such as Denso and Sumitomo to set up business in Cambodia. Most of the auto parts products produced in Cambodia are used for export trade, and the annual export value of related products is more than 200 million US dollars (2015-2019).

 

By the end of 2021, Cambodia has two registered car manufacturing plants with a total investment of US $20 million, one in SvayRieng province and Phnom Penh City, the country’s capital; There are seven registered auto parts factories with a total investment of US $41 million, four of which are located in the country’s border town of Poipet and three in Sihanoukville, Svay Rieng and Phnom Penh. According to data released by the Council for the Development of Cambodia (CDC) on June 17, 2022, four car brands – Southeast Motors, China FAW, Dongfeng Motors and MG – plan to open car assembly plants in Cambodia, with an investment of about $15.6 million.

 

In addition, Cambodia’s motorcycle market is particularly prosperous, attracting global motorcycle assembly plants and parts manufacturers. Currently, Cambodia produces more than 400,000 motorcycles a year. Cambodia’s bicycle assembly industry has attracted investment from world-renowned bicycle manufacturers and parts factories, most of which are aimed at building factories in the Special economic Zone of Bavet in Svay Rieng Province. There are currently five bicycle assembly companies in Cambodia. Cambodia is the largest bicycle exporter in ASEAN and the fifth largest in the world. In 2020, the value of bicycles exported from Cambodia to major international markets totaled more than $533 million, an increase of 27% compared to 2019.

 

There are currently two main iron ore distribution areas

 

Cambodia currently has two main iron ore distribution areas, one in the Phnom Deck area and the other in Preah Vihear province. According to data released by the General Administration of Mineral Resources of Cambodia, the total iron ore reserves in the PhnomDeck area are estimated to be 5 million to 6 million tons, while the northern part of the country may have 2.5 million to 4.8 million tons of high-grade iron ore reserves.

 

Cambodia’s coal area is located on the east side of the Tonle Sap River in Stung Treng Province. There are 27 proven coal seams and coal reserves of 7million tons.

 

According to the information collected by the World Steel Association on-the-spot investigation, Cambodia currently mainly imports a large amount of steel from Vietnam and Thailand. At present, Cambodia’s annual steel demand is estimated at 2.5million tons, and this value is expected to continue to grow, aided by the development of country’s auto and parts industry.