Tata foresees dive in steel demand

Tata foresees dive in steel demand

SET-listed Tata Steel (Thailand) Plc (TSTH), a unit of India's largest steel maker, expects demand for steel in Thailand to end the year nearly 15% down from last year, in line with near-zero growth of the country's GDP.

"Domestic consumption this year is expected to be very bad, possibly 1.1 billion tonnes compared with 1.29 billion the year before," said Rajiv Mangal, president and chief executive.

He said Thailand's political turmoil played a large part in the sluggish consumption, as it deteriorated consumer confidence in their future income, resulting in lower purchasing power.

The main reasons for the demand dip are the delayed infrastructure projects and private sector investment, he said.

"In 2014 we will record a contraction of sales even though we were trying to penetrate neighbouring markets such as Laos, Cambodia and Indonesia," said Mr Mangal.

He said Thai steel products were unable to compete with Chinese steel in some regional countries such as Myanmar, where it could import with low logistics costs. Chinese steel prices are cheaper imported than many domestic sectors in the region can produce due to investment privileges and low tariffs.

Mr Mangal is hopeful that steel consumption in Asean in 2015 will beat previous estimates of 3.3% growth, increasing more than 5%, as he can see rapid improvement in regional economies.

"Some neighbouring economies have done a pretty good job in expanding, as their GDPs are relatively low such as Laos and Cambodia. They cannot be compared with Thailand, as they're much smaller," he said.

Mr Mangal projects Asean steel consumption will reach 65 million tonnes next year, up from 60 million this year.

Next year, the company expects its export revenue from Asean markets to grow in line with consumption in the region, up from 15% of total revenue.

In its fiscal first half ended Sept 30, it achieved 11.5 billion baht in revenue for a net loss of 69.7 million and steel sales volume of 574 million tonnes.

"We hope the government's infrastructure projects will start by the first quarter of 2015, as now we don't have any government orders," said Mr Mangal.

Tata Steel has annual production capacity of 1.7 million tonnes from three plants in Rayong and Chon Buri provinces.

TSTH shares closed yesterday on the SET at 88 satang, down one satang, in trade worth 3.93 million baht.

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