Thailand’s steel demand
In the first half of this year, the average price index of construction materials in Thailand’s steel and steel products category fell by 4.4% year-on-year, mainly due to concerns about the contraction of steel supply and demand in many regions of the world. At the same time, Thailand’s domestic steel demand is also relatively weak, due to the high cost of living on consumers’ residential purchasing power impact, and the slow formation of the new government may delay the approval of the government budget for the new fiscal year, which will lead to the delay of new construction projects. In addition, the influx of overseas steel products has also had an impact on the decline in Thai steel prices.
However, according to the data released by the Southeast Asian Iron and Steel Association, in 2023, Thailand’s GDP is expected to grow by 2.7% to 3.7% year-to-year, and steel demand is expected to increase by 3.7% year-to-year, reaching 16.7million tons, the main driving force is better demand from the construction industry. How is the development of Thailand’s steel industry in recent years?
Thailand is the second largest economy in ASEAN after Indonesia, with a total land area of 513,120 square kilometers, ranking 53rd in the world. From 2000 to 2019, Thailand’s GDP grew at a compound annual rate of 3.9%. In 2020, Thailand’s GDP shrank by 6.1% (the second-lowest among ASEAN countries). Following a military coup in 2014 that led to a change of government, Thailand’s GDP growth rate has remained at 2% to 4% due to political instability.
Thailand’s economy is dominated by services, and after continuous development over the past decade, the service sector now accounts for 60% of GDP, compared with 32% for industry and 8% for agriculture. Thailand’s economy is more mature, with private consumption accounting for about 50 per cent of gross domestic product. In recent years, Thailand’s fixed asset investment has remained at around 23% and exports have remained above 10%. From 2015 to 2021, Japan (17%), China (15%), Singapore (8%) and the United States (7%) have been the main sources of foreign direct investment (FDI) in Thailand. Thailand’s population is ageing fast. In 2020, the median age in Thailand is 40 years. About a quarter of Thailand’s population is expected to be 65 or older by 2040. The sharp decline in fertility is a major driver of Thailand’s ageing population. A shrinking labor force has pushed up wages, making Thailand less attractive for foreign direct investment.
In 2021, Thailand’s apparent steel consumption is 18.5 million tons, ranking second among ASEAN countries. However, if calculated on a per capita basis, Thailand’s per capita GDP ranks fourth among ASEAN countries and its per capita apparent consumption of steel ranks third. According to the 20-Year National Strategy (2018-2037) officially released by the Thai government, Thailand is committed to developing into a high-income country by 2037. In 2016, the Thai government released the “Thailand 4.0 Vision”, which plans to achieve its development goals through economic upgrading, gradually moving away from commodity production and low value-added manufacturing, and towards the development of a value-based, innovation-driven economy.
The construction and automotive industries are the two largest steel industries in Thailand, accounting for 60% and 17% of the country’s total steel use respectively.
After the Asian financial crisis, the construction sector’s share of Thailand’s GDP fell sharply (5.1% in 1996) and has remained at 2.5-3% since then. Since 2016, the Thai government has increased spending on large-scale projects and increased investment in small and medium-sized projects such as the expansion and upgrading of the road network, while the country’s “public and private” construction (according to the government’s 2015-2022 Infrastructure Development Master Plan) has also continued to heat up, boosting the development of the Thai construction industry. At present, there are not many large-scale projects in Thailand. With previous projects nearing completion, the country’s construction industry is expected to show moderate growth over the next few years.
The automobile industry is another important steel industry in Thailand. Thailand is known as the Detroit of Asia. From 2000 to 2020, the compound annual growth rate of Thailand’s automotive industry is 5.1%, which is higher than the compound annual growth rate of all steel industries (3.1%). In 2012-2013, Thailand’s vehicle production peaked at nearly 2.5 million units. Since then, affected by factors such as the country’s domestic political instability and the Sino-US trade war, Thailand’s automobile production has remained at more than 2 million units, and will be severely hit again by the epidemic in 2020. Thailand’s auto industry rebounded in 2021, but has not yet reached pre-pandemic levels.
The automobile industry is another important steel industry in Thailand. Thailand is known as the Detroit of Asia. From 2000 to 2020, the compound annual growth rate of Thailand’s automotive industry is 5.1%, which is higher than the compound annual growth rate of all steel industries (3.1%). In 2012-2013, Thailand’s vehicle production peaked at nearly 2.5 million units. Since then, affected by factors such as the country’s domestic political instability and the Sino-US trade war, Thailand’s automobile production has remained at more than 2 million units, and will be severely hit again by the epidemic in 2020. Thailand’s auto industry rebounded in 2021, but has not yet reached pre-pandemic levels.
At present, Thailand’s steel production capacity is about 10 million tons, all using the electric arc furnace (EAF) production process. The main steel companies in Thailand are GSteel, GJSteel and Tata Steel Thailand. In December 2021, Nippon Steel announced that it would pay $419 million for 49.99% of the shares of GSteel and 40.45% of the shares of GJSteel. So far, no new capacity expansion projects have been announced.
Considering the efficiency and cost issues, the equipment utilization rate of Thai steel enterprises is not very high. Thailand’s domestic demand for flat materials is mainly met through imports and exports (accounting for 70%-75% of total imports). Japan, China and South Korea are the top three sources of imports for Thailand, while the United States, Indonesia and Vietnam are the destination countries for its Sada exports.
Thailand’s raw material resources are not very rich, its iron ore production is very small, mainly dependent on imports. The Phu Ang Iron ore mine, located in Le Fu, Thailand, is the largest iron ore mine in Thailand, with total reserves estimated at 10.9 million tons and an iron content of 65%-67%. Another mine in Thailand is the Phu Hia iron ore mine. Both mines are located in northeastern Thailand.
Thailand’s important metal minerals are tin (the world’s third largest producer), tungsten (the world’s second largest producer), niobium, tantalum, lead, zinc, gold, iron and stibnite. Feldspar, clay minerals, fluorite, barite, potassium salt and rock salt are important non-metallic minerals in Thailand.
Overall, it is expected that the country’s steel demand will grow but grow slowly in the future, and the apparent consumption of steel is expected to reach about 25 million tons by 2035, when Thailand’s annual per capita steel consumption is expected to reach about 350 kilograms. In the long run, in the context of global steel price readjustment, the improvement of production technology and process due to the reduction of carbon emissions will lead to increased production costs, so all enterprises in the Thai steel industry chain will inevitably increase the production cost of steel raw materials and steel products. Although the initial price adjustment is less urgent and limited to specific groups, companies will need to gradually improve their production processes to reduce direct and indirect carbon emissions in order to remain competitive in the market over the long term.
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