News Room - Steel Industry

Posted on 04 May 2009

Ore prices seen lifting demand

World prices of iron ore are set to fall by 30-40% in coming months, prompting local steel manufacturers to believe the corresponding declines of steel-product prices would help boost sluggish demand.

 

Suppliers from China and Japan are expected to cut the prices as the slow consumption has intensified price competition, said Payungsak Chartsutipol, chairman of the Steel Industry Club at the Federation of Thai Industries (FTI).

 

Iron ore is now traded at $100 per tonne. Thailand mainly imports ore from Australia, Brazil, India and South Africa for local consumption, he added. "Long-term contract prices are being negotiated but they are expected to be 30-40% lower," he said.

 

According to Mr Payungsak, steel consumption in Thailand is projected to decrease from 12-13 million tonnes in 2008 to approximately 10 million tonnes this year due to the slump of the economy and the construction sector.

 

Local steel plants are now running at only 30-40% of their maximum capacities. Consumption of cold-rolled steel, for example, is projected at 2.6 million tonnes in 2009, half the previous year's level. Of the amount, 300,000 to 400,000 tonnes are imported, he added.

 

SET-listed Thainox Stainless Plc is also running at less than half of its capacity of 300,000 tonnes per year due to falling demand, according to chairman and chief executive Prayudh Mahagitsiri.

 

Thainox shareholders yesterday agreed to lift the foreign-ownership ceiling to more than 50% to pave the way for a foreign partner to raise its stake.

 

Thainox, majority-controlled by the Mahagitsiri family, has been in talks to sell more than 50% of its stake to South Korea's Posco, which currently owns 15% of the Thai company.

 

While the steel market is undergoing price adjustments, the rubber market has shown bright prospects.

 

Mr Payungsak, also a vice-chairman of the FTI, said Thailand's exports of natural rubber and rubber-based products could increase substantially from last year's 429 billion baht in the future through logistics improvement and a value-added supply chain.

 

Chayo Trangadisaikul, chairman of the Rubber-based Industry Club, said overall rubber exports were highly likely to jump to 600 billion baht. Currently, China is the largest export market, followed by the US, and Japan.

 

Rebounding demand from China has lifted rubber prices from 51 baht per kilogramme to 56 baht, he added.