Russia-Ukraine Crisis to Push Production Costs in Thai Industrial Sector Higher by at least THB80 Billion (Current Issue No.3315)

The Thai industrial sector, which is heavily dependent on raw material imports, is set to experience higher production costs as global raw material prices are projected to stay at elevated  levels  during most of the remainder of 2022 if the Russia-Ukraine war is prolonged and sanctions against Russia are still in place. We, at KResearch, are of the view that the Thai industrial sector will withstand the worst of the Russia-Ukraine crisis in terms of higher raw material costs than our prior estimate, as compared to a no-war scenario. Additionally, the Thai industrial sector will need to seek substitutes amid scarcity or unavailability of raw material supplies, and this will add cost burdens to most manufacturers via reduced profit margins or slowdown/suspension in production.  

Preliminarily, it is expected that the Russia-Ukraine conflict will push production costs in the Thai industrial sector higher by at least THB80 billion. Each business will encounter varying degrees of impact based on its reliance on raw materials and ability to adjust. Entrepreneurs in the food, automotive, construction material and packaging businesses are expected to be major casualties as the proportion of their raw material costs to total costs is relatively high. Concurrently, some of the impacts will be passed on to consumers through gradual increases in goods prices, depending on a number of factors such as the volume of remaining inventories, ability to procure substitutes, competition in the market and consumer purchasing power.