Thai factories suspend work as orders fall and costs rise
Temporary business suspensions affected 18,998 Thai workers in June, up 58.08% from May, as manufacturers faced lost orders and higher costs
- Businesses are invoking Section 75 to suspend operations temporarily, mainly because of accumulated losses, a lack of customer orders or widespread cancellations.
- Automotive parts manufacturers face declining demand as production shifts towards electric vehicles (EVs), which require far fewer components than internal combustion engine (ICE) vehicles.
- Garment manufacturers face growing competition from imports and lower-cost overseas producers, leaving capacity utilisation low.
- Rubber products manufacturers face volatile oil prices and rising fertiliser and energy costs, prompting downstream factories to delay orders.
- Plastics manufacturers face production cost increases of 30–50% as war disrupts supplies of raw materials imported from the Middle East, creating shortages.
Businesses in Thailand’s automotive parts, garment, rubber products and plastics industries are increasingly suspending operations temporarily as falling orders, accumulated losses and higher production costs put pressure on employment.
Temporary suspensions affected 18,998 workers in June 2026, an increase of 58.08% from May and 18.61% from a year earlier. Partial suspensions rose even as the number of establishments halting all operations declined.
The Bank of Thailand (BOT) has expressed concern about businesses facing intense competition and invoking Section 75 of the Labour Protection Act to suspend work. It identified the four industries as areas requiring attention.
Pimjai Leeissaranukul, chairwoman of the Federation of Thai Industries (FTI), told Krungthep Turakij that employment remained broadly stable in July, but the labour market was showing structural weaknesses consistent with worsening conditions in manufacturing.
More workers affected by partial suspensions
The June figures showed:
- 44 establishments suspended part of their operations, up 22.22% from the previous month.
- 23 establishments suspended all operations, down 14.81% from the previous month.
- 18,998 workers were affected, up 58.08% month on month and 18.61% year on year.
Pimjai pointed to temporary business suspensions and claims for unemployment benefits as signs of labour-market fragility.
She said the four industries identified by the BOT were also directly exposed to the US–Iran war through more expensive imported raw materials and transport disruption that was increasing shipping costs.
FTI vice-chairman Montri Mahaplerkpong said businesses were invoking Section 75 mainly because they had accumulated substantial losses, were no longer receiving their normal volume of orders or had suffered widespread cancellations.
International conflicts and broader economic difficulties were adding to those pressures, he told Krungthep Turakij.
Four industries face different pressures
1. Automotive parts
The shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs) is reducing demand for traditional components.
The FTI’s analysis put the number of parts in an ICE vehicle at about 30,000, compared with 1,500–3,000 in an EV. It said the technological transition was beginning to affect employment in the parts industry.
2. Garments
Thai clothing manufacturers face competition from both rising imports and overseas producers with lower costs.
Ready-made clothing imports increased by 12.30% year on year in the first half of 2026, according to the FTI’s analysis.
The garment Manufacturing Production Index (MPI) fell by 2.18% year on year, while capacity utilisation stood at 49.06%.
The federation said the industry’s difficulties extended beyond purchasing power to production costs, technology, the speed of product development and branding.
3. Rubber products
The Middle East war has increased volatility in global oil prices, with upward pressure potentially weakening demand. Downstream factories were tending to delay orders while assessing developments.
Managing profit margins was also becoming more difficult as fertiliser, chemical and energy costs fluctuated. Those pressures fed into transport expenses and the chemicals used in rubber processing.
4. Plastics
The plastics industry faces direct exposure to Middle Eastern supply disruption because it relies on the region for 60–70% of its naphtha imports. Naphtha is a basic feedstock for plastics production.
Disrupted shipping routes have tightened supplies of plastic resins in both domestic and global markets.
Domestic producers reduced output by an average of 25–30% to manage limited raw materials. Total production costs increased by 30–50% during March–May 2026, forcing some small and medium-sized enterprises (SMEs) unable to absorb raw-material costs to close.
Section 75 provides for temporary suspension
Saengchai Teerakulvanich, chief strategy officer of the Federation of Thai SMEs, said some businesses had struggled for an extended period with limited liquidity, difficulties adapting their operations and volatile markets.
Temporary suspension under Section 75 allowed them to reduce operations while trying to survive the transition.
The provision applies when a necessary business interruption, arising from a cause other than force majeure, prevents an employer from operating normally. Saengchai cited raw-material shortages, economic problems and cancelled orders as reasons businesses might need to suspend work.
Under the amended law, employers must pay affected employees at least 75% of their normal working-day wages throughout the period in which they are not required to work. Employers must also notify employees and labour inspectors in writing at least three working days before the suspension. Labour Protection Act, Section 75
Saengchai warned that temporary measures might not be enough to prevent permanent closures.
“If there are no support measures, many businesses using Section 75 will ultimately decide to close. That is the outcome we do not want to see,” he said.
He called for government measures to help businesses restart, including:
- Business recovery plans and access to SME advisers or mentors
- Low-interest financing
- Factoring arrangements to turn receivables into working capital more quickly
- Measures to address payment-term problems
- Debt restructuring and repayment schedules aligned with businesses’ ability to pay
Source: Bangkokbiznews
