Chinese machines stir local concern
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Chinese machines stir local concern

Concern has been raised that local steelmakers will import low quality steel-producing machinery from China following the Chinese government's crackdown on factories producing substandard steel.

The import of more low quality machines from China, mostly by small and medium-sized Thai steelmakers, could mean the rise in low quality steel production, said Somsak Leeswadtrakul, honorary executive committee chairman of the Iron and Steel Institute of Thailand (ISIT).

This will drag down prices and prevent Thailand from producing high quality products to compete in the high-end market, an approach in line with the Thailand 4.0 policy, he added.

The Chinese government wants to control the output of low quality steel and has started closing down steel plants that are subpar, cutting down total production by some 90 million tonnes over the past few years.

"This has forced steel businesses that were shut down to sell cheap steel-producing machines to Thai steel producers. Chinese companies have already asked the institute and related agencies to help them find Thai buyers, which raises our concerns," said Mr Somsak.

He added the cheap Chinese machines will cause pollution, make only low quality steel that has limited use and prevent Thai steel producers from improving competitiveness.

At a time when Asean has no serious regulations to prevent machine imports, many Chinese second-hand machines are expected to be imported into Thailand and other countries in the region, he said.

The Chinese government plans to cut low quality steel output by 100-150 million tonnes by 2020 in order to prevent oversupply.

In 2016, Thailand imported around 5 million tonnes of steel from China.

Thailand is the world's fourth largest steel importing country, buying mostly from Japan, South Korea, Taiwan and Russia.

The ISIT proposes the government issue a regulation requiring Thai construction companies that won bids for state infrastructure projects to source at least 50% of the required steel from local producers.

This is expected to help raise domestic demand substantially above the normal demand of 18 million tonnes a year, said Mr Somsak.

Korakot Phadungjit, the secretary-general of the Thailand and Iron Steel Industry Club under the Federal of Thai Industries, said the Chinese steel sector has been suffering plunging prices and factory shutdowns over the past few years largely due to oversupply.

He said China has total steel production capacity of 800 million tonnes annually, while demand remains at 700 million tonnes, forcing the Chinese government to continue cutting supply and exports in order to help shore up prices.

However, traders and industry officials said the impact of the Chinese government's attempts to curb steel supply has still been slower than expected.

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