Thailand's steel demand this year will increase by 13 to 20 per cent thanks to an expected recovery in the automobile, electrical-appliance and property sectors, as well as the government's investment projects, according to the Iron and Steel Institute of Thailand.
Institute director Wikrom Vajraragupta recently said that if the Map Ta Phut problem could be solved this year, which would allow construction work at many petrochemical projects to proceed, demand is likely to rise to the maximum forecast of 12 million tonnes, up from 10 million tonnes in 2009.
But if the crisis remains unsolved this year, Wikrom said, minimum steel demand should be 11.5 million tonnes, an increase of 13 per cent from last year's steel consumption.
About 60 per cent of steel demand is for the construction of property projects and government-planned infrastructure projects such as roads and rail lines. The remaining 40 per cent will be used in the automotive, electrical appliance and other industries.
The forecast is based on an assumption that Thailand's auto production this year will hit a record high of 1.4 million units, and on the government's planned spending under its Thai Khemkhaeng stimulus programmes.
"Typically, annual steel demand growth is roughly 2 percentage points higher than the country's gross-domestic-product growth. For example, if Thailand's GDP grows by 6 per cent, steel demand will grow around 8 per cent. So, the forecast for steel demand this year is unusually high because of the economic recovery and the government's economic stimulus programmes through the Thai Khemkhaeng scheme," he said.
Table: Steel consumption
Thailand's steel demand is expected to reach 12 million tonnes this year. More than half of it is from the property sector and construction projects under the government's Thai Khemkhaeng package.
Volume
60 per cent: property sector/Thai Khemkhaeng
25 per cent: automotive industry
10 per cent: electrical appliance industry
5 per cent: others like food can
Source: Iron and Steel Institute of Thailand
However, the forecast for steel demand is lower than the record high of 13.6 million tonnes recorded in 2008, when steelmakers stocked inventories due to high prices, added Wikrom.
Steel prices this year should be fairly stable, remaining between US$400 and $600 (about Bt13,000 and Bt19,600) per tonne, an increase of 5 to 10 per cent from last year, he said.
In February, the price of hot-rolled steel coil was $580 per tonne, up from $523 in January. This month, the price of cold-rolled steel coil is $650 per tonne, a slight increase from January, while steel bar currently fetches $500 per tonne.
If prices stayed at these levels, Wikrom said, steelmakers would likely enjoy profits this year.
Kasikorn Research Centre recently said in a report that steel prices this year were expected to increase over last year due to domestic and international economic growth, the government's investment projects and rising manufacturing costs.
The country's government this year set aside a Bt1.4-trillion budget for the second phase of the Thai Khemkhaeng programme (2010-2012). The bulk of the funds is to be spent on infrastructure projects.
Coal, slab and iron-ore prices are expected to continue their rise, which began late last year when a decline in global iron-ore volume was forecast. The main reason for the decline was a move by India, the third-largest exporter of iron ore, to adjust its export tax by 5 per cent in order to prevent a shortage in the domestic market.
However, a Chinese government measure to rein in lending this year - aimed at preventing a bubble in the property sector - will put pressure on steel prices.
China is the world's biggest steel consumer, accounting for one-third of global consumption.
The Kasikorn report suggested Thai steelmakers cautiously plan to stock inventories and closely monitor factors affecting global steel prices, such as interest-rate moves in China and the progress of economic recovery in certain markets, particularly the US and Europe.
