Display mode (Doesn't show in master page preview)

1 Oct 2020

Industry

Issues regarding the policy to promote the use of domestic steel (Business Brief No.3146)

For the past several years, Thailand's steel industry has encountered challenges that stem from price competition against steel imports from China due mainly to steel oversupply in the global market. Since 2014, Chinese steel manufacturers have cleared out their excessive stock via exports to markets including Thailand – one of the world's leading steel importers. Although many countries, including Thailand, have different methods of dealing with the huge amount of imported steel from China that floods their own markets, such as Anti-Dumping (AD) and Safeguard, these measures help to relieve the issue to only a limited extent. Under these circumstances, Thai steel manufacturers called for related authorities to step in and continually support the Thai steel industry.

On September 1, 2020, the Thai Cabinet approved the draft Ministerial Regulation No. 2 on supplies and procurement methods of materials that the government wants to promote or support, with additional Section 9: Materials. The new regulation aims to promote domestically produced materials, particularly steel that must account for 90 percent of the value or volume used in a construction project. However, the steel must first gain approval from the Thai government to confirm that it was manufactured inside the country. Furthermore, these Thai manufacturers would only win the auction for material procurement if their bids are no more than 3 percent higher than the lowest bid.

KResearch believes that this policy should help to increase domestic steel production by around 360,000 tons annually, for the next 3 years. Such a figure suggests that capacity utilization would rise from 55 percent to 58.6 percent. At the same time, it may also cause construction costs of the government projects to increase by approximately 0.5-0.8 percent.​


Industry