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Amid turnaround, Tata concerned about dumping in steel market

Despite falling demand and uncertainty over anti-dumping assistance from the government, Tata Steel (Thailand) remains on course to achieve a turnaround in its operations and return profits after four years of losses.

Rajiv Mangal, president and chief executive officer of Tata Steel (Thailand), Thailand's largest producer of long steel products, said the company had booked a net profit of Bt4 million in the nine-month fiscal period from April to December 2013. This marks a huge turnaround from a loss of Bt991 million in the previous fiscal year.

During the nine-month period, sales volume rose nearly 100,000 tonnes to more than 950,000 tonnes, and earnings before interest, tax, depreciation and amortisation went up from Bt297 million to Bt743 million. The firm's third-quarter performance from October to December 2013 was marginally affected by the ongoing political turmoil but still showed a net profit of Bt4 million, compared to the Bt487-million loss in the previous fiscal year.

The turnaround has been achieved through increased production and export of reinforced steel bars, which Tata sells under its Tiscon brand, and a higher profit margin. The production has been raised to 60,000 tonnes a month during the past 12 months, up sharply from 40,000-45,000 tonnes in the past. Concurrently, the company reduced the production of commoditised wire rods.

"Ninety per cent of our exports are reinforced bars. We're trying to increase its production further but this depends on the plant's adaptability. It will take some time and some investment," Mangal said.

Thailand's overall steel consumption has increased every year since 2009, going up from 10.76 million tonnes in 2009 to 17.7 million tonnes last year. However, it is a matter of concern that while growth in imports had risen from 8.09 million tonnes to 12.25 million tonnes during the same period domestic steel production had recorded no growth, he said.

Rise in imports

Demand in Thailand for steel products started to decline in the final quarter of 2013 although there was full-year growth of 4.6 per cent. Steel imports, however, grew by 8.5 per cent last year.

The impact was more severe for long steel products in which Tata Steel is a major player, as consumption grew by 5 per cent but imports surged 18 per cent in 2013. Imports marginally slowed down in the last quarter, thanks to a temporary anti-dumping measure imposed on high-carbon wire rods imported from China. Imports from China resumed at the end of the temporary anti-dumping measure on December 7. Due to the political turmoil and the "shutdown" of government offices, the Commerce Ministry's decision on extending the anti-dumping measure has been delayed.

"We're now in a very difficult situation. With growth slackening everywhere, there is surplus capacity and in addition manufacturers from China are dumping their steel. Every country, including the US which is a very free trade country, has put in place anti-dumping measures against unfair imports. All we need is fair treatment, nothing extra," Mangal said.

Thana Ruangsilasingha, Tata's chief operating officer, said there was clear evidence that Chinese producers received nine per cent subsidy for their steel exports, besides enjoying a 5-per-cent tax benefit by exploiting a loophole in the Thai customs duty structure.

"The problem is that we're the only manufacturer. The Commerce Ministry says they cannot be only looking at the dumping [factual] but also have to consider some 'balances' [as there are many domestic consumers of high-carbon wire rods]. But we think this is not fair," he said.

If Tata, the only domestic manufacturer, discontinues its operations, Thailand's trade deficit would shoot up by another Bt10 billion per annum, Tana said.

High carbon wire rods are used for producing pre-stressed concrete wires and strands, springs, slings, among others.

Listed on the local bourse, Tata Steel (Thailand) is 70 per cent owned by Tata Steel, India's largest steelmaker.


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