Sluggish car sales in Thailand led to an 11-12% decrease in premium-grade steel sales during the first four months of 2024, underscoring worries concerning reduced steel consumption in the country this year, says the Federation of Thai Industries (FTI).
Local steel manufacturers will face a challenging period in terms of sales prospects as demand for steel is expected to drop in every industrial segment, said Nava Chantanasurakon, vice-chairman of the FTI's Iron and Steel Industry Club.
"The premium-grade steel supplied to the automotive industry decreased because car production decreased and domestic car sales dropped amid weak consumer purchasing power and debt issues," he said.
The high rate of household debt caused banks to become more selective about lending money to prospective car buyers. They set stricter criteria in granting car loans for fear of racking up non-performing loans.
In the fourth quarter of 2023, total household debt tallied 16.3 trillion baht, accounting for 91.3% of GDP, according to the National Economic and Social Development Council.
According to the FTI's Automotive Industry Club, car manufacturing from January to April decreased by 17% year-on-year to 518,790 units.
Domestic car sales during this four-month period decreased by 23.9% year-on-year to 210,494 units.
Steel sales also turned sluggish because of lower demand for products used in house improvement as well as the state budget spending which has yet to boost new construction projects, said Mr Nava.
Thailand's steel consumption stands at around 16 million tonnes a year. Currently, the country's steel capacity utilisation stands at only 28%, which represents a record low.
Mr Nava anticipates that the rainy season will lead to a reduction in steel consumption during the second half of 2024 as it coincides with the steel market's off-peak period.
The impact of cheap steel imports from China is also a grave concern. Tata Steel (Thailand) Plc, a unit of India's largest steelmaker, said earlier it is concerned as China continues to dump cheap steel products in Southeast Asia as the Chinese economy decelerates.
Mr Nava is worried about Chinese steel maker Xin Ke Yuan Steel's plan to build a hot rolled steel factory in Rayong, with a production capacity of 6 million tonnes, as this will intensify competition in the market.
"The Board of Investment is considering approving its investment plan. Approval of the plan would affect local steel manufacturers," he said.