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23 Jun 2023

Real Estate and Construction

Thai steel prices in 2023 are set to fall due to slowing global demand…Environmental issues may lead to base price adjustment (Current Issue No.3417 Full Ed.)

คะแนนเฉลี่ย

        Steel prices in Thailand are expected to shrink in 2023 by 6-10 percent YoY in line with a decline in global steel prices amid the world economy that is still facing high risks. In particular, the Chinese market, as a major producer and consumer, shows signs of reduced demand. Meanwhile, domestic demand remains subdued on account of economic conditions in which the high cost of living is dampening the purchasing power of the private sector, and political uncertainties that may cause a delay in fiscal 2024 budget approval, which would lead to the postponement of new public construction projects. However, steel prices are expected to remain high compared to pre-pandemic levels due to rising production and management costs (electricity, labor and transportation) in the country. Other issues to be monitored include the economic slowdown in China that may result in excess steel production capacity being diverted to other countries including Thailand, and consideration of the extension of retaliatory trade measures for hot-rolled steel sheets from China that may contribute to steel price volatility in Thailand going forward.

        Looking ahead, strengthened environmental measures among countries and net zero trends will affect players in the Thai steel industry, resulting in increased costs at different timeframes. KResearch holds the view that certain groups which could see short-term impacts before other players in the supply chain include 1) steel producers/traders exporting steel to the EU and US markets where the Carbon Border Adjustment Mechanism (CBAM) measures are scheduled to take effect; and 2) steel producers/traders/users in steel-related industries, especially the automotive industry, that have clear net zero goals. This will result in higher costs for these players as they will need to procure environmentally friendly raw materials/steel products for production and export to maintain market share. In the long term, however, global steel prices may be adjusted to reflect higher production costs resulting from technology upgrades and manufacturing process improvements. It will thus be challenging for all players in the Thai steel industry’s supply chain to avoid a potential increase in costs of raw materials and steel products. Although initially urgent adaptation may be limited to certain groups, the business sector must gradually improve production processes to reduce direct and indirect carbon emissions so as to maintain long-term competitiveness.

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