Tata Steel – Thailand is one of the renowned names in manufacturing of long steel products. SteelMint in interaction with Mr. Rajiv Mangal, President & CEO of Tata Steel (Thailand) Public Company Limited learned about his views on ramp up plans of the company and expected increase in country’s crude steel production in the coming years. Below are the edited excerpts from the interview
1. Has Thailand steel industry poised for growth, what is the future outlook?
Unlike other countries in ASEAN region where dependence of steel sector on construction is very high (>75%), Thailand’s steel consuming sectors are diverse. Total apparent finished goods steel consumption in the country was 17.4 MnT in 2018, up by 4.8% Y-o-Y. This translates to approx. 263 kg per capita of steel consumption. Construction, Machine & Appliances and Automobiles sectors consumed 55%, 21% and 19% shares of the total steel consumed in 2018 respectively.
As per Iron & Steel Institute of Thailand (ISIT), steel consumption in 2019 is likely to be around 19 MnT , an increase of approx. 8% in 2018. Personally, I feel growth will be in the range of 4-6% on account of continuing trade frictions in international arena and political uncertainty in the country after the general elections in March 2019.
2018 witnessed a Y-o-Y increase in automobile, cement and canned seafood production by 8.9%, 1.2% and 13.6% respectively. With the first car policy after effects almost gone and huge infrastructure development plans announced for next five years by the Thai Govt, steel consumption is expected to witness healthy growth coming years.
There are roughly 20 crude steel-making facilities in Thailand, nearly all of which use electric arc furnace technology to produce steel. In comparison, over 150 hot-rolling, cold rolling, cold-drawing, and coating mills are in operation in Thailand which relies heavily on imports of semi-finished and finished steel products for their manufacturing inputs.
2. Is steel capacity utilization low in Thailand?
In 2018, Thailand imported 15.2 MnT of steel, an 8 percent increase from 14.2 MnT in 2017. At the same time, domestic production was approx. 7.1 MnT with average capacity utilization below 50%. This is not good for the financial health of the domestic steel industry. One of the major reason for low capacity utilization in Thailand is that 100% steel production is based on secondary route of steel making. This makes the cost of steel produced locally higher than primary route steel manufactured in major steel producing countries like China, Japan and Korea. At the same time, most of the steel made in the country is in upstream and commodity by nature. With new blast furnace based capacities coming on stream in Vietnam and Malaysia in last one year, challenge for Thai steel producers have aggravated. Need of the hour is consolidation and shifting up in the value chain.
3. What are the measures being taken by Tata Steel Thailand to increase production and demand from local mills and how is the scenario after HBIS take over?
Tata Steel Thailand has a rated capacity of 1.7 MnT pa of long products spread across three manufacturing sites in Thailand. By virtue of better product mix, pan Thailand reach and sale of branded products, average capacity utilization of the company is in the range of 70-75%. This is much higher than country’s average. Exports account for 10-12% of the total sales. During 2011-16, Thailand saw widespread dumping of wire rods from China. With structural changes in Chinese steel industry and Thai Govt imposing tariff and non-tariff measures, imports from China has come down in last 2 years.
In coming years, Tata Steel Thailand plans to enhance capacity utilization beyond 80-85% by increasing sale of high end wire rods suitable for auto sector, ready to use Cut & Bend products and high strengthRebars for construction companies. With strong brand presence in Laos, Cambodia and Myanmar, exports to these countries is also poised to go up.
The share purchase agreement signed with HBIS in end Jan’19 is not yet closed.
4. Do you see steel scrap imports rising in coming years in Thailand, what is your forecast?
As scrap remains the primary raw material for steelmaking in Thailand, its consumption is bound to increase in line with steel production increase in coming years. At the same time, domestic steel industry has taken up with the Govt to promote exports of value added products and discourage export of scarce raw material like steel scrap. Another factor to be closely tracked is increase in steel production & consumption in Vietnam and Malaysia from the new investments in last 2-3 years. If these countries resort to aggressive exports, Thailand may witness increased imports of semis and finished products. Thus rate of change in import of scrap in Thailand will depend upon policy for prevention of scrap exports and imports of semis and finished steel from neighboring countries.
To know more on scrap industry in emerging markets, book your seat at SteelMint’s 4th Steel Scrap, Billet & DRI Summit. The conference is being organized during 27-29’th Aug’19 in Bangkok, Thailand.
~ Inputs by Dr. Sheena Abraham