News Room - Steel Industry

Posted on 23 Feb 2009

Tata forecasts 20% sales drop

SET-listed Tata Steel (Thailand) Plc, the country's biggest producer of construction steel, expects its sales volume to drop 20% to 1.1 million tonnes this year as overall steel consumption dips 17% from 2008.

 

Tata, whose Indian parent ranks sixth globally, will nonetheless start operating its 3.5-billion-baht upstream steel facility as planned by the middle of the year to integrate production and trim costs, said president Santi Charnkolrawee.

 

The mini blast furnace - the first of its kind in Thailand - would produce 500,000 tonnes a year of semi-finished products including billet and pig iron, mostly for in-house use. The company at present operates three plants with a maximum capacity of 1.7 million tonnes of steel bars per year.

 

"This year, we project the overall demand for construction steel to drop by 17% after a slight decline last year. So far, we have not seen any indication that the local market will pick up," he said.

 

"The current situation will prompt us to report lower sales volume of about 1.1 million tonnes in 2009, down from 1.4 million tonnes a year earlier."

 

Mr Santi also hinted that turnover would be flat or slightly lower this year.

 

"We are currently running at about 65% of total capacity. If the situation does not worsen, I think we will be able to withstand the crisis," he said.

 

Approximately 10% of the output would be exported, mainly to neighbouring countries such as Vietnam and Indonesia. India is considered a potential market for construction steel as the economy has yet to be severely affected by the global recession, he said.

 

Formerly known as Millennium Steel, Tata emerged from the merger of Siam Iron and Steel Co, Siam Construction Steel Co and NTS Steel Group. The Thai unit is 60% owned by India's Tata Steel Ltd and its wholly owned subsidiary Natsteel Asia Pte.

 

The blast furnace is located at the NTS plant in Si Racha, Chon Buri. For its operation the company plans to source iron ore mainly from a mine in Loei together with imports of coke iron from China.

 

Prices of raw materials have decreased, with coke iron now at $300 per tonne, down from $400-500 last year, said Mr Santi.

 

"The facility will help us to save a significant portion of cost," Mr Santi said.

 

He added that as a raw material the company currently uses steel scrap, which has surged to between 9,000 and 10,000 baht per tonne from 6,000 baht late last year.

 

Mr Santi forecasts that local steel demand will see a recovery in 2010 in line with the global market. The government's attempts to stimulate economic growth will benefit the steel industry by the end of 2009 at the earliest, he said.

 

Consequently, the price of steel bars is targeted to stay at the current level of 18,000 to 20,000 baht per tonne this year, compared with the peak of 37,000 baht last year, he said.

 

In the last three months of 2008, Tata's sales revenue was 4.63 billion baht, down 43% year-on-year. Sales volume was off 34% to 383,000 tonnes on lower steel demand and political turmoil.

 

For the quarter Tata posted a net loss of 2.26 billion baht versus a net profit of 616.5 million in the same period of 2007 as the average selling price decreased by 2,900 baht per tonne.

 

Shares of Tata Steel (TSTH) closed at 0.94 baht on the Stock Exchange of Thailand on Friday, down six satang, in trade worth 42.87 million baht.