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Singapore — ASEAN's automotive demand for steel and gasoline could have bottomed out as vehicle production in May grew 61.6% from 50,760 units in April, data from the ASEAN Automotive Federation showed.

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The market sentiment was bullish, although the May output figure reflected a year-on-year plunge for the eighth straight month at 82,023 units, down 77.4% from May 2019, as COVID-19 destroyed automotive demand.

With the May numbers summed up, ASEAN's production for the first five months of 2020 stood at 1.08 million units, down 39.2% year on year.

Nationwide lockdowns slowed both vehicle production and sales in the region, consequently lowering demand for gasoline and raw material steel.

Carmakers' production plummet

ASEAN's leading carmaker Thailand projected production to fall to 1 million-1.4 million units in 2020, figures from the Federation of Thai Industries, or FTI, showed June 18. The range widened from its previous forecast in May for a 33.8% fall at 1.33 million units.

Local sales in May rebounded 34% from April at 40,418 units, though still 54% down from a year earlier, while annual sales in Thailand may drop 30%-50% from 2019's 1.01 million units, the FTI said.

Production could have bottomed out in April "if there is no second wave [of the pandemic]," the FTI said, with May's output at 56,035 units versus 24,711 units the month before.

Thai output in May and April marked a multiyear low that was unseen since 2009, when monthly production for the year averaged 83,282 units. This was also a far cry from the latest five-year average of 167,000 units/month.

Indonesia, ASEAN's second largest producer, too shared hopes of a bottoming out, as May's output totaled 2,627 units, down from 21,434 units in April and a 97.5% collapse year on year, the Indonesian Automotive Manufacturers, or Gaikindo, said.

Unlike its peers in ASEAN, however, Indonesia's vehicle sales did not bounce back in May. The month tallied at 3,551 units, down 55% from April, and a 96% contraction from a year ago.

April's output saw production retracting its way back to monthly averages last seen in 2006, but May's production was almost "wiped off from the board" entirely, Gaikindo said.

Recovery depends on pandemic containment

"Many attempts at forecasting, however, have since only resulted in downward revisions. How the industry is further impacted depends on successful containment of the outbreak," said Yeoh Wee Jin, secretary general of the South East Asia Iron & Steel Institute, or SEAISI, June 30.

SEAISI expects a steel demand recovery on the back of an estimated $332 billion worth of stimulus packages announced by Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, as of June 16.

Nevertheless, SEAISI projects ASEAN's flat steel production to dip to 41 million mt in 2020 from 41.8 million mt in 2019.

Industry participants said any production recovery would depend on the entire supply chain, adding that this was equally as important as the recovery needed in consumer demand for new vehicles.

"A shortage of components, disrupted logistics, and labor shortages may affect global supply chains, disrupting auto production," said Katsuyuki Nakai, a primary credit analyst at S&P Global Ratings, June 30. "We assume factories will restart operations within a short period, catching up on their production plans toward the year-end."

Gasoline demand tepid

Lower vehicle output also traced lackluster gasoline demand in May, as more vehicles kept off the road due to lockdowns, sources said.

Indonesia, the region's largest buyer of gasoline, saw state-run Pertamina's planned import volumes fall to around 9 million barrels in May, with most of the cargoes going into storage, S&P Global Platts reported earlier.

With Pertamina's lower import volumes, Indonesia is set to see a dip of imported gasoline in May, from 10.56 million barrels imported a year ago.

May also saw tepid demand from other Southeast Asian countries, namely Malaysia, Singapore and the Philippines, which have yet to fully ease lockdown restrictions.

Reflecting the general bearish demand in May, the FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures averaged minus $1.46/b, weakening from the plus $4.17/b average in May 2019, Platts data showed.

Some optimistic participants said movement in private vehicles is likely to post a sharper recovery in the following months, as people favor private transportation over more crowded public transportation.

"The people that can afford to drive will drive. Not many people want to squeeze in buses or trains with the threat of infection still there," one Singapore-based source said.

ASEAN Vehicle Production (Units)

Country

April

May

Indonesia

21,434

2,627

Malaysia

275

12.286

Myanmar

0

703

Philippines

0

1,216

Thailand

24,711

56,035

Vietnam

4,340

9,156

Total

50,760

82,023

Source: ASEAN Automotive Federation