The Thai government is likely to raise its imported steel quota from Japan only a bit to please local steel producers, despite strong pressure from Japan, says a senior executive in a steel company.
Next week Thai and Japanese officials will have a final discussion over the quota. Over the past several months Japanese steel producers and steel users operating manufacturing bases in Thailand have attempted to lobby the Thai government to raise the quota for its high-quality steel to be imported duty-free.
Last month, the Japanese Chamber of Commerce in Thailand stepped forward and asked Thai Industry Minister Chakramon Phasukvanich to increase the duty-free quota for premium-grade steel to some millions of tonnes more.
Japanese business leaders argue their automotive base located here will require a lot higher volume of premium-grade steel to service their planned increase of vehicle output.
Udom Wongviwatchai, former secretary-general of the Thailand Board of Investment, said the government understood Japanese car makers' request and want an exact figure for the steel imports.
Thailand's vehicle output is expected to rise to 2.5 million units annually over the next two years from under 2 million units in 2014.
Under the Japan-Thailand Economic Partnership Agreement (JTEPA), 1.2 million tonnes of steel can be imported from Japan without an import duty. Import duties for steel range from 5-10% depending on the item.
Two weeks ago, Thai government officials visited Japanese government officials in Tokyo and the steel import duty issue was on the agenda.
"Japanese businesses complained that the import duties for steel are high," said the source.
The source said Japan had persisted in its request to raise the duty-free quota under JTEPA for three types of steel at 1 million tonnes each.
However, the Thai government decided to increase the duty-free import quotas only a smidgeon, said the source.
One of the types is Q9, a hot-rolled coiled steel used in the supply chain industry. The Thai government will grant a duty-free quota of 210,680 tonnes for this type, down from the Japanese request of 729,500 tonnes for 2015.
Another type is Q10, a cold-rolled steel, of which Thailand will grant a duty-free quota of 237,470 tonnes, down from the request of 357,900 tonnes. The final type is Q11, another type of cold-rolled steel used extensively in the automotive industry, of which the Thai government will grant a duty-free quota of 221,460 tonnes, below the Japanese request of 454,440 tonnes.
A different steel company executive said the Thai government asked Japan to do high technology and know-how transfers under previous trade arrangements including training programmes for Thais with Japanese steel specialists on high-grade steel production.
"The Thai government has been really clear that they want manufacturing here to use more local content, so if the Japanese complain locally produced steel is not up to their standards, they have to teach us how to make it instead of asking for import privileges," said the source.
The source said the Thai government is waiting to see whether the Japanese will do the technology and skill transfers as promised. Thailand wants to see solid evidence of Japanese technology transfer before deciding on a significant increase in the duty-free imported steel quotas, said the source.