Posted on 31 July 2006

 

Thailand is both largest producer and consumer of steel products in South East Asia.  The nation consumed more than 14.1 million tons last year, an increase of 8% compared to the year before. The industry is supported by robust steel consuming segments such as construction, automotive, and appliances.  Demand has been growing steadily and inevitably attracts regional steel companies to investing in the nation.  The growth of the industry is presented in the following table.

Thailand Steel Consumption

	2002	2003	2004	2005
Production	6.7	7.5	9.0	9.4
Import	4.7	5.1	6.0	6.7
Export	1.5	1.6	1.9	1.9
Apparent Consumption	10.0	11.0	13.1	14.1

(Source: SEAISI)                                                                                  in million tons

Opportunities

The growing import shows that there are opportunities for new capacities in the nation. Thailand's steel industry is structurally unbalanced.  Upstream industries are weak or even non-existent in the case of ironmaking so the country heavily depends on imported scrap, pig iron, and also semifinished steel of billet and slab.  The development of upstream steel industries (i.e. ironmaking and steelmaking) will strengthen the industry supply chain, and stabilise whole industry. 

Furthermore, most of imported steel products are belong to higher grades of steel.   Imported flat products are mainly used for auto industry and appliances while imported wire rods are mostly cold heading quality and high carbon. Therefore, steelmakers can shift to these high grade –and more profitable– markets to substitute imports. 

    

Consolidation movements

It has been encouraging to see the industry moves toward consolidation.  This time is among domestic producers:  G-Steel proposed to buy out NSM's debt and eventually planned to take 33% of ownership within 18 months (Bangkok Post, 28 June 2006).  It was reported that they are also in talks with Sahaviriya to explore possibilities in creating a bigger firm.  This strategic alliance will  lower their cost structure by merging operation functions such as business development, marketing, procurement, and production technology.  NSM has also been actively seeking foreign partners –including steelmakers and iron miners–  to strengthen its business.

Earlier this month G-Steel has signed an MOU with Baosteel of China to study  cold rolled steel market in Thailand (Metal Bulletin, 10 July 2006).  This may be a start for a future joint venture or other kind of alliances. Last year the company also signed another MOU with JP Plantech of Japan to develop slab castor production facility (Bangkok Post, 28 September 2005). 

Previously it was a regional player Tata Steel of India who made a move by taking over Millennium Steel. Tata (and its subsidiary NatSteel) now became one of the biggest players in South East Asia with 4 million tpy capacity.   

Thailand steel industry has shown some movements toward consolidation.  In a long run this hopefully will create a regional leader with solid capabilities.  We will see if other nations in the region will follow the same path to create a more viable business.

 

 

 

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