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Chinese Demand Will Keep Prices High

June 17, 2008

By Bangkok Post, Thailand

Jun. 14–Steel prices will remain high at least until the end of this year in line with global market trends, driven mainly by China and India, according to Wikrom Vajarakupta, director of the Iron and Steel Institute of Thailand.

Prices of commodity steel would remain in the range of US$700 to $1,000 a tonne for long products and $650 to $1,000 for flat products, compared with below $500 last year, Mr Wikrom said.

China and India remain the main drivers as they attempt to upgrade infrastructure to cope with rapid economic growth. As well, China will require huge investments in reconstruction of buildings and infrastructure following last month’s Sichuan earthquake.

Mr Wikrom forecast that demand in Thailand would also be healthy, approaching 13.87 million tonnes, close to the record set in 2005. Last year, the country consumed 12 million tonnes of steel products.

Demand this year would be driven by rising demand from the recovering construction industry as state megaprojects get under way, as well as the automotive and electrical goods industries

In the first four month of this year, the country’s total production was 3.03 million tonnes, up 11 percent from 2.73 million tonnes in the same period last year.

Steel demand could remain strong for several years to come if state megaprojects including rail systems all materialise as planned.

Capacity utilisation in the local energy, automotive, food, beverage, chemical, paper and construction sectors now averages more than 80 percent, indicating that new investments for capacity expansion would be needed soon.

Paiboon Nalinthrangkurn, the deputy managing director of Tisco Securities, said global steel demand would double to one billion tonnes in 10 years.

Consequently, he said, steelmakers could become blue-ship stocks alongside companies in the oil and energy sector. The steel sector now accounts for only 2 percent of the Stock Exchange of Thailand’s market capitalisation, compared with 35 percent for energy.

“The [upward] cycle of the steel industry started several years ago and will soon be riding to a peak, the same as the energy sector,” Mr Paiboon said.

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