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STEEL
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Win: Government has overlooked us |
Thailand's biggest steelmaker, Sahaviriya Steel Group of Companies (SVG), is looking for ways to better integrate its operations in a bid to strengthen negotiating power with global steel giants who are hunting smaller firms to acquire.
''We are aiming at investing in ore mining, pushing our 500-billion-baht smelting project to start as soon as possible, and a steel production plant overseas also is in our sights,'' said group president Win Viriyapraphaikit.
''In doing so we could achieve a goal of being the region's largest integrated steel producer.
''I have to admit that it is very difficult for us to keep a majority holding in the assets we founded,'' he said, adding that integration among its own businesses from raw materials to downstream products would ensure supplies of raw materials and lower its costs at a time of intensifying competition.
The world's largest steel company, ArcelorMittal, has set the tone for a global wave of consolidation in the industry, and has annual output of 120 million tonnes. Mr Win said the market leader's success had pushed other big contenders such as JFE, Nippon Steel and Posco to pursue similar strategies.
Surging demand for steel products over the past five years, coupled with capacity utilisation constraints, have been key catalysts. As a result, says Mr Win, a handful of gigantic players can wield huge influence on prices.
''With ArcelorMittal's output bigger than the combined capacity of all its peers, it can announce production cuts when steel market prices soften.''
He said world steel prices were now completely controlled by a few groups from iron ore miners to steel producers, making it even harder for smaller players to survive, even when they are the beneficiaries of high prices.
Not only have steel producers been consolidating, but also more than 75% of the iron ore in the world is controlled by three operators that can basically dictate the prices of raw materials.
The iron ore prices have risen by 70% to 85% on average since early this year. The spot price of coking coal, the main fuel used in the steel industry, is up more than 300% to a record $365 a tonne from only $80 last year, while high oil prices have doubles freight costs _ a major concern for shippers of heavy products such as steel.
Mr Win said steel bar was $1,500 per tonne in July compared with $570 in June 2006, with steel sheet up to $1,200 a tonne from $600 at the end of last year
He said Sahaviriya's huge smelter would be a key weapon to help the company fight back against global market dominance by a few foreign companies.
The company, however, has faced three years of delays due in large part to protests by environmental activists and communities in Prachuap Khiri Khan.
The company is now conducting an environmental impact assessment and once the report is approved, it will resubmit its application for investment privileges with the Board of Investment.
Mr Win also called for support from the government in the form of a master plan for the steel sector, similar to plans prepared by rival countries. Among them are Vietnam, China and Pakistan, which view steel as a national strategic industry.
''The Thai government has overlooked this industry. We have survived in business through numerous periods of hardship without any help from the state,'' he said, adding that steel as an industry represented economic value second only to energy.
Having a local smelter, he said, would reduce dependence on imported steel that now costs the country some 500 billion baht a year. It would also reduce the costs of local producers that want to make more varieties of high-grade steel to meet the demand of key industries such as automobiles and electronics.
The Sahaviriya Group is the majority shareholder in the country's top hot-rolled steelmaker, Sahaviriya Steel Industry Plc (SSI). It also makes cold-rolled steel, bars for construction and various high-grade finished steel products.
SSI shares closed on Friday on the Stock Exchange of Thailand at 96 satang, unchanged, in trade worth 11.7 million baht.
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