Over-stocked iron/steel makers look to Asean amid global uncertainty
The global iron and steel industry is facing a supply glut as demand has been inhibited by murky global economic conditions. This is forcing iron and steel producers to look for new markets to offload accumulated inventories.
One of those markets is Asean, where demand for these commodities is thriving as many member states gear up infrastructure and industry.
Given this, Thai iron smelters and steel producers may need to improve their competitiveness quickly to brace for steeper competition within the region, Kasikorn Research says. Although the Thai iron and steel industry has the highest production capacity and export value among Asean nations, it has been found that Indonesia and Malaysia are fast catching up.
Nevertheless, Thailand’s advantages remain intact, thanks to technological expertise and large construction and automotive industries that remain attractive to international investors.
To cope with heightened competition, KResearch is of the view that domestic iron and steel providers may consider certain approaches.
Domestically, they may need to maintain their inventories at appropriate levels, as global iron prices remain volatile. As well, they should find additional funding if they need to bolster liquidity or avoid liquidity risk.
Research and development may also be required to reduce energy consumption, and scrap iron should be sold off to add value to their operations.
Trade in scrap iron should be promoted to reduce iron-ore imports.
Within Asean, says the research house, Thai iron and steel providers should focus on finished products to gain added value as well as to enhance product quality standards.
KResearch has assessed that the value of Thai iron and steel exports to Asean this year will reach somewhere between Bt57.5 billion and Bt59.0 billion, growing 3.0-5.5 per cent from 2011.
This is a result of rapid development in many regional infrastructure projects, such as roads, hydropower plants and other public-utility assets.
It also expects that Asean iron and steel demand will increase to at least 55.5 million to 56.7 million tonnes, up 4.0-6.0 percent from last year. Growth in demand may reach 5.0-6.5 per cent.
To enhance the competitiveness of the Thai iron and steel industry, the government is being urged to adopt clearer product standards for this sector and expand logistics networks cross the Asean region to facilitate more fluid trade and investment activity, it said.
