News Room - Steel Industry

Posted on 18 Jul 2008

Raw material prices may stabilise or drop (Thailand)

Construction raw-material prices have stabilised, and may even drop, because demand for residential projects is expected to decline between 5 per cent and 7 per cent compared to last year, construction-material experts said. 

According to survey conducted by The Nation this week, construction-material prices are expected to become stable or even fall in the second half of the year after rising an average 11.2 per cent in the first half.

Steel prices have risen 58.6 per cent followed by wood prices, up 10.4 per cent, while the cost of sand has risen 7 per cent.

The president of one of Thailand's steel-industry leaders, Lao Peng Nguan or LPN Group, Pipat Preedawiphat said world prices for construction-grade steel are expected to stabilise or rise about 3 per cent in the second half.

However, that will not affect the domestic market because demand for steel here is expected to drop responding to a 5-to-7-per-cent slump in the property market in the second half, he said.

This is a result of a drop in purchasing power of consumers.

"Some steel producers or importers who stock steel for speculation in the first half of the year have now started to open bids to the market. As a result, we believe steel prices in the domestic market will be stable or may even drop about 3 per cent in the second half compared to the first half of the year," he said.

Meanwhile, paint prices have risen between 7 per cent and 10 per cent in the first half of the year.

Paint company TOA Paint (Thailand) managing director Jatuphat Tangkaravakoon said the company has increased its production price for solvent-based paints 7 per cent this month. This is due to raw-material prices rising between 7 per cent and 10 per cent in the first half of the year.

"We don't think we will adjust product prices in the second half of the year, although our production cost has risen because demand in the market is expected to drop slightly," he said.

"Now, the renovation market is expected to display strong growth as compared to new housing projects. Meanwhile, we have to maintain our price to match customer demand to boost our sales growth 10 per cent to Bt8.8 billion by the end of the year, although our net profit this year will be 10 per cent lower than last year," he said.

Given this market trend, a number of new city-condominium projects, worth nearly Bt50 billion, will be launched in the second half of the year when most property developers believe raw-material prices should be stable.

These developers include Plus Property, Sansiri, Property Perfect, Asian Property Development, LPN Development and Chaopraya Mahanakorn.

Most new projects will be developed by major developers because many small- and medium-sized property companies do not have enough cash to launch new projects, Property Perfect chief operating officer Dr Teerachon Manomaiphibul said.