The global iron and steel industry is now facing a supply glut as demand has been inhibited by murky global economic conditions. This forces iron and steel manufacturers to look for new markets to offload accumulated inventories. One of those markets is ASEAN where iron and steel demand is thriving as many member states gear up infrastructure and industry.
Given this, Thai iron smelters and steel producers may need to quickly improve their competitiveness to brace for steepened competition within the region. 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, our advantages remain intact, thanks to technological expertise and larger construction and automotive industries that remain attractive to international investors.
To cope with heightened competition, we at KResearch are of the view that domestic iron and steel providers may consider the following approaches:
1) Domestically, they may need to maintain their inventories at appropriate levels as global iron prices remain volatile. In addition, they should find additional funding if they need to bolster liquidity or avoid liquidity risk. R&D may also be required to reduce energy consumption, and scrap iron should also be discarded to ensure product quality remains intact. Trade in scrap iron should be promoted to reduce iron ore imports.
2) Within ASEAN, Thai iron and steel manufacturers should focus on finished products to gain on their added value. They should continue to maintain product quality standards.
KResearch has assessed that the value of Thai iron and steel exports to ASEAN in 2012 will reach some THB57.5-59.0 billion, growing 3.0-5.5 percent YoY, as a result of rapid development in the many regional infrastructure projects, e.g., roads, hydroelectric dams and other public utility assets. In addition, we expect that ASEAN iron and steel demand this year will increase to at least 55.5-56.5 million tons, up 4.0-6.0 percent YoY. Growth in demand may reach 5.0-6.5 percent YoY in 2013.
To enhance the competitiveness of our iron and steel industry, our government is being urged to adopt clearer iron and steel product standards and expand logistics networks across the ASEAN region to facilitate more fluid trade and investment activity.