Steel makers decry cheap imports
Chinese rivals have hobbled some local producers, but some argue the industry must improve its competitiveness.
Many Thai steel companies have suffered plunging sales because of weak purchasing power from a tepid global economy. Their situation has been worsened by cheap steel from China being dumped in Thailand, say industry officials.
China continues to dump cheap steel throughout the world, and in Thailand domestic steel producers find it hard to survive, says Wikrom Wajracupta, chairman of the Asean Iron and Steel Council.
Rising steel exports from China have caused a global glut, depressing market prices.
"Chinese steel exports have increased to surpass 100 million tonnes this year, up from 90 million the previous year," says Mr Wikrom.
The Chinese government is aware of the issue and has tried to do something to curb exports, but it has had no impact on the global market, he says.
The hardest hit company was Sahaviriya Steel Industries Plc (SSI), which recently announced the liquidation of its British subsidiary, SSI UK, after complaining of cheap steel from China lowering global steel prices.
SSI's losses led to huge debt that forced its creditors to set aside large provisions, which is likely erode banks' profits.
Mr Wikrom says several countries have set up think tanks or special committees to curb Chinese steel imports and protect their local steel industries, including Thailand and Malaysia.
The classic way to deal with this problem is anti-dumping measures, which the Thai steel industry has demanded be applied several times since the Anti-Dumping Act was passed in 1999. However, the measure has had little effect in preventing dumping because of complicated enforcement including a long investigation period before imposing an anti-dumping tariff.
Thai steel makers blame the slow and complicated anti-dumping procedure for failing to protect their industry. But the Commerce Ministry, which oversees anti-dumping, argues the measure must be precise and applied carefully or it could damage the country's trade.
"The probe takes a long time because we need to check thoroughly whether local producers were damaged by dumping," says Adul Chotinisakorn, a Foreign Trade Department deputy-director.
Once anti-dumping measures are imposed, he says, the defendant or foreign companies can file a lawsuit against Thailand with the World Trade Organization, which might cause a bigger problem for Thailand as the case could take years to deal with.
The Thai government also has the option to impose a safeguard measure to curb dumping. A safeguard measure allows the government to impose a higher import tariff immediately for 200 days to give the local industry time to adjust their business strategy to compete.
But local producers argue 200 days is too short for them to adjust as they have relied on government protection the past decade, hampering their development.
"The 200 days is unlikely to be sufficient for the Thai steel industry to adjust," says Mr Adul.
Mr Wikrom says failing an effective legal recourse, the only way for the Thai steel sector to survive is to improve its competitiveness. Local companies must learn to be independent rather than reliance on government protection.
"The trend on the global steel market is to switch from low-quality grades to higher ones, especially premium grades that can resist earthquakes, or the SD40 and SD50 grades," says Mr Wikrom. The Thai steel market needs to invest more in research and development (R&D) to survive intensified competition.
Mr Wikrom expects total steel consumption in Asean to be 63-64 million tonnes next year, down 5% from this year mainly because of the weak global economic outlook.
Songwoot Graipaspong, chairman of the Thai Iron and Steel Industry Club of the Federation of Thai Industries, says China is expected to dump not only steel but also other goods on the world market since it normally produces at large volume to gain an economy of scale.
As a result, Thai industries, especially the steel industry, need to invest more on R&D to compete in the upper market with value-added goods.
To increase the Thai steel industry's R&D, Sittichai Leeswadtrakul, chief executive and president of SET-listed Millcon Steel Plc, urges the government to provide tax incentives or privileges for R&D investment.