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Published on April 8, 2008

Sahaviriya Steel Industries (SSI) will continue to have difficulties managing costs if it cannot start its steel blast furnace in Prachuap Khiri Khan next year as planned, one analyst said yesterday.

The blast furnace is expected to produce slab, which is the main raw material in producing hot-rolled coil. SSI at present must import slab from markets abroad, such China.

A Siam City Securities analyst said SSI's performance would not be directly affected if the plan were delayed, because the furnace will be operated through its subsidiary. However, SSI would be affected by fluctuations in the slab price and could not compete with rivals offering lower costs.

The global slab price currently ranges from US$600 to $700 (Bt19,000 to Bt22,104) a tonne. SSI must purchase nearly 200,000 tonnes of slab each quarter.

The disadvantage for SSI if the furnace plan is delayed will be that it cannot manage its raw material costs, which will hurt its performance, the analyst said.

The plan stipulates that furnace production will be divided into five phases with total production of 30 million tonnes over 15 years.

Last year, SSI submitted a revised investment plan for its furnace to the Board of Investment. The company will postpone its operation plan from this year to next year.

The first phase covers 2009-2011.

Next year, the plant's production capacity is scheduled to be 1.5 million tonnes a year with an investment budget of Bt36 billion. The company must produce 1.5 million tonnes of slab at a cost of Bt20 billion.

It will need to produce 2 million tonnes of slab in 2011 at a cost of Bt34 billion.

The biggest amount of spending will take place in the final phase, scheduled for 2023.

That year, SSI must produce 7.5 million tonnes of slab at a cost of Bt117 billion.

The analyst said his firm had not yet calculated the effects of the project being delayed.

Nalin Viboonchart

The Nation