The Israel-Hamas conflict is expected to cause a short-term negative impact for the steel industry, which is experiencing a cyclical downturn, says Tata Steel Thailand Plc (TSTH), a unit of India's largest steelmaker.
The Russia-Ukraine war caused an surge in global crude oil prices last year, driving up energy costs among steel factories.
"TSTH has yet to see the impact of the Israel-Hamas war on raw materials in the steel industry, but in the short term, the conflict could cause oil prices to fluctuate, affecting the operating costs of manufacturers," said Tarun Kuma Daga, president and chief executive of TSTH.
"If the war is prolonged, the global economy will hardly be able to avoid an unpleasant impact."
Steel consumption in Thailand from January to August this year stood at 4.28 million tonnes, which was roughly the same as the amount produced last year.
Between July and September, TSTH saw its total sales decrease by 7.5% year-on-year to 280,000 tonnes because of low domestic demand, a surge in cheap steel wire rods from China and extremely weak international market sentiment, which adversely impacted deliveries.
Of the total produced during this period, the company sold 249,000 tonnes in the domestic market and exported 31,000 tonnes, against a backdrop of high household debt, higher interest rates and baht depreciation in the country, said Mr Daga.
The July-September period is the second quarter of the company's fiscal 2024, which runs from April 2023 to March 2024.
"It is a hard time for us because the steel industry globally is in a downturn phase," said Mr Daga.
During the second quarter, TSTH's revenue fell 20.2% year-on-year to 6.08 billion baht.
Mr Daga expects the new government's policies to boost the economy and he looks forward to spending from the new budget.
Local steelmakers want the authorities to accelerate budget distribution as it would fuel state infrastructure development projects, which require steel during the construction process.
In the private sector, it is estimated that real estate projects continue to increase, according to TSTH.
The company has called on the government to launch new measures to prevent the influx of cheap steel from China.
The quantity of steel wire rods from China continues to increase in Thailand and in other Asean member states, TSTH said.