Thailand Steel Industry in 2007 - What's next?

Posted on 21 March 2008

Source: SEAISI
After recording an all time high in apparent steel consumption of 14.1 million tonnes in 2005, Thailand's steel industry has been on a downward trend largely due to political uncertainties as well as the problem in the southern part of Thailand. Steel consumption in the country dropped by 5% to 13.4 million tonnes in 2006. This negative trend has continued into 2007, resulting in a further contraction of apparent steel consumption at -6% y-o-y to 12.6 million tonnes.

Thailand is a scrap based steel producing country with total annual capacity of 6.5 million tonnes of semi-finished steel. The consumption of semi-finished steel was highest in 2005 at 10.8 million tonnes. Latest figure for 2007 showed a decline to 8.8 million tonnes. However, domestic supply has been increasing and reached a high of 5.6 million tonnes in 2007. On the other hand, Thailand's import of semi-finished steel declined sharply from 5.7 million tonnes in 2005 to 3.9 million tonnes in 2006. Import continued to drop to 3.4 million tonnes in 2007. It is expected that Thailand will continue to enhance its self-sufficiency in domestic supply for semi-finished product in the coming years to serve its growing demand and to substitute import, the supply of which is tightening. Hopefully, the new steel-making projects could help to fulfill domestic requirements in terms of both quality and quantity.

Long product consumption (bar, wire rod and section) continued to decline significantly in the last two years. Total consumption in 2007 was 4.7 million tonnes, a decrease of 10% from 2006. The political uncertainties in the country caused a delay in the implementation of several major construction projects. This has resulted in a sharp drop in bar production, which is mainly to serve the construction sector. The Iron and Steel Institute of Thailand estimated that domestic output of bar declined by 7% in 2007, following a sharp drop of 14% in 2006.

Hot rolled sheet consumption in 2007 was more upbeat with a moderate increase of 3.5%, from a sharp drop of 12% in 2006. However, this was mainly met by the huge increase in import which registered a 22.5% growth rate to reach 2.9 million tonnes. The bulk of the import comprised of hot rolled carbon sheet and hot rolled pickled and oiled sheet, which were mainly high quality products to serve the automotive sector. Domestic output, however, dropped by 4.4% to 3.9 million tonnes. Export maintained an upward trend at 8% to 1.04 million tonnes. (more analysis on import export trends can been found in

Cold rolled consumption in 2007 declined 5% y-o-y to 2.2 million tonnes. Domestic production surged by 11% to 1.98 million tonnes, while import dipped 15% to 0.7 million tonnes. Production of hot dipped galvanized sheet declined 11%, while export remained almost at the same level as 2006. This was a reflection of the slowdown of construction sector in the country. On the other hand, import of hot dipped galvanized sheet from Japan and South Korea rose sharply at the rate of 8% and 40%, respectively. The imports were mainly high quality galvanized sheet, such as galvanneal or zero-sprangle sheet to serve automotive and electrical appliances sectors.

Consumption of metal coated sheet such as Zinc-alume and color coated sheet, mainly for the construction sector, declined slightly to total 354,000 tonnes in 2007. Domestic production registered a significant increase but it was mainly to serve export market.

Tinplate production in 2007 dropped substantially at the rate of 21% to 233,000 tonnes. However, import rose by 32% to 132,000 tonnes. Local producers claimed that the demand remained high but domestic producers were affected by low-priced imports. The recent capacity expansion of Thai Tin Plate would help to boost domestic production and replace some of the imports.

Thailand's GDP growth rate for 2007 is estimated at 4.6% and the economy is projected to expand further to almost 6% in 2008. The new government of Thailand has launched various mega projects and is pushing for more economic activities for the first half of the year. This would lead to more construction projects, including condominiums and new housing areas. Hence, we can expect to see increased steel consumption from the second half of 2008.

For the automotive sector, domestic production growth rate has moderated over the last two years, compared to the sharp growth in the preceding years. Nevertheless, total production in 2007still grew at a healthy 9% to reach 1.3 million vehicles. About 75% of which was the production of pick-up truck, which expanded at the rate of 8.5% in the same period. It is expected that the more stable political environment as well as the government's policy to continue to promote the industry will boost consumer confidence and spending in 2008.

The Bank of Thailand has also reported a continued increase in domestic production of major products such as refrigerators, washing machine and air-conditioners in 2007 with an average annual growth rate of 8-11% since 2002.

Taking into consideration the above positive developments, Thailand's steel consumption is expected to regain its growth path in the coming years. Major steel consuming sectors have started to pick up and are expected to continue to grow further. The construction sector, in particular, is expected to propel the consumption growth for steel. The Iron and Steel Institute of Thailand has projected a 5% growth rate in steel consumption for 2008 and 8-10% for 2009.

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