President Cholanut Yanaranop said the baht had strengthened by more than Bt2 against the greenback since early this year. Although the company has hedged foreign currency, it still stands to lose about Bt300 million by the appreciation.

The baht, like regional currencies, has been continually climbing against the greenback due to the anticipated slowdown in the US economy.

Senior director of the Bank of Thailand's domestic economy department Suchada Kirakul said yesterday that the recent appreciation of the baht was a result of the general bearish tone of the US dollar. She said the central bank would continue to monitor baht movements as usual but reiterated that it would not allow excessive volatility in the currency.

"We'll let the baht move in line with the market direction and won't let it resist the broad trend," Suchada said.

At market opening yesterday, the dollar traded at Bt36.675. The baht has steadily strengthened against the dollar in past weeks to a fresh seven-year high of Bt36.60 earlier this week. Yesterday it ended at Bt…

A stronger baht will hurt exporters, whose income will be diluted when dollar income is converted to a lower amount of baht.

Cementhai now exports 35 to 40 per cent of total production capacity.

Despite the baht appreciation, the company sees no need to adjust export proportion, as it wants to keep its overseas customer base.

Cholanut said the gap between raw material and product value next year might decrease to US$570 (Bt20,905) per tonne from $640-$650 per tonne this year because of more supply from new crackers in Iran and the Middle East.

For example, the global production capacity of ethylene next year will increase to 5.8 million tonnes, up from 4 million tonnes this year.

"We see signs that the petrochemical business will slow down next year due to the delay in cracker construction in the Middle East," he said.

In the last quarter of this year, he said, the company expects the plastic pellet market will slow down due to the lower oil price and the re-operating of olefins plants in Asia after maintenance is completed.

However, he added, the product's price is expected to remain higher than in the same period last year.

He said the petrochemical business could contribute Bt50 billion to Bt60 million the country's income each year, but he did not think that income from petrochemical products would increase next year because production capacity would not increase until 2009 and 2010.

Concerning the olefins and polyolefins business, Cholanut said the price of plastic pellets this year was higher than last year owing to the rising of the naphtha price, which was affected by political instability in oil-producing countries. The higher price is also because plastic-pellet manufacturers in China sped up their production for higher exports to the European Union ahead of the imposition of higher tariffs.

Chalida  Ekvitthayavechnukul

The Nation