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News from the Import Industry

May 26, 2008

Local steel firms look to tap into growing demand BY: NAREERAT WIRIYAPONG

Rising global demand and surging prices have put Thailand's steel industry in the spotlight, with executives expecting prices to remain high until at least the third quarter of this year.

Steel prices are now about 50% higher than they were in December. The main drivers have been raw material costs and the supply-demand situation, said Wikrom Vajragupta, director of the Iron and Steel Institute of Thailand.

Even though high prices could cut demand, Mr Wikrom said global steel demand would grow at least 5-6% this year while Thailand expects growth of 4-5% to at least 13 million tonnes.

Wuttichai Sresthabutra, business planning manager G Steel Plc, the country's largest hot-rolled steel producer, said huge demand from China had been driving steel prices. The massive reconstruction effort required in earthquake-damaged Sichuan could lift prices further.

Hot-rolled steel has risen from $600 per tonne in January to about $1,000. In the US, prices are $1,200 per tonne for June delivery, Mr Wuttichai said.

''There is a tendency for prices to surge further in coming months. There is speculation that global supply is going to be tight,'' he said.

Siam City Securities forecast global demand for all steel types to reach 1.28 billion tonnes this year, up 7% from 2007 with key drivers including China, Russia, and the Middle East where consumption is expected to grow 11% to serve ongoing construction projects.

''Prices will remain on the rise until the third quarter when the Beijing Olympics are finished and steel factories around Olympic stadiums reopen,'' a sector analyst from the brokerage said.

Payungsak Chartsutipol, president of the Steel Industry Club of the Federation of Thai Industries (FTI), said local demand would pick up this year due to the start of big state infrastructure projects.

In the fourth quarter, global supply might be tight, threatening countries such as Thailand that lack local raw materials, said Mr Payungsak, also an executive vice-president of Siam United Steel, a cold-rolled steel manufacturer.

The bright prospects have been pushing up share prices of steel companies on the Stock Exchange of Thailand, said Chai Chiraseveenupraphan, a senior analyst at Capital Nomura Securities.

''The rise is fundamental. After years of sluggishness, 2008 seems to be the year of the steel industry,'' he said.

Among steel stocks, Mr Chai said Tata Steel Thailand (TSTH) seemed to be the most interesting one because of its product variety covering the automotive and other sectors. As well, the Indian-based steel group has its own supply of raw materials abroad.

Mr Wuttichai said a number of long-term institutional investors had been stepping up investment in the company, which has been profitable since it became a public company in 2004.

Thainox Stainless Plc, the country's only stainless steel maker and the biggest of its kind in Southeast Asia, is preparing to raise its production capacity to 300,000 tonnes a year by the third quarter from the current 200,000 tonnes.

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