Sahaviriya Buys Japanese Shares

By Post Reporters, Bangkok Post, Thailand

Apr. 7–Heavy competition in the local steel industry, coupled with new challenges posed by the Thailand-Japan free trade agreement, have prompted Sahaviriya Steel Industries Plc (SSI) to invest in the local unit of a Japanese steelmaker.

SET-listed SSI, the country’s largest hot-rolled steel producer, is spending 3.5 billion baht to acquire a majority stake in the Japanese-run company Thai Cold Rolled Steel Sheet (TCRSS).

SSI president Win Viriyaprapaikit said the transaction would further strengthen the company’s position as a competitive vertically integrated steel producer.

SSI has agreed to purchase 335.79 million shares, equivalent to 31.37 percent, at 0.281 per share, from the Japanese major shareholders, JFE Steel Corporation and Marubeni Corporation.

The deal would make SSI the majority shareholder in TCRSS with 40.14 percent, up from 8.77 percent at present.

Currently, 80.71 percent of the shares in TCRSS are held by Japanese interests with JFE Steel holding 38.42 percent, Marubeni 37.57 percent and other Japanese investors 4.72 percent. The remaining stake is owned by Thai investors, including SSI with 8.77 percent, its parent Sahaviriya Group with 6.6 percent, and other investors 3.91 percent.

TCRSS has an annual production capacity of 1.2 million tonnes per year at its plant in Prachuap Khiri Khan.

SSI said it was financing the acquisition with credit from local financial institutions with a seven-year maturity.

Mr Win said SSI would gain a competitive edge over other local hot-rolled coil (HRC) producers by securing distribution of premium-grade HRC for cold-rolled coil (CRC) production, benefiting its long-term inventory management.

An SSI source said the investment would lessen the potentially severe impact of the Thailand-Japan free trade agreement, which Prime Minister Surayud Chulanont signed on Tuesday in Tokyo.

The local steel industry has lobbied for protection, despite assurances from Thai negotiators that preferential import tariffs would apply only to steel products that cannot not be locally made. Tariffs on Japanese hot-rolled coil products would be gradually reduced to allow Thai industry to adjust.

“This deal enables us to develop a fully fledged steel manufacturing business in preparation for competition,” the SSI executive said.

Ayudhya Securities said the FTA’s effects would not be felt immediately, as tax reductions on commodity-grade Japanese HRC won’t start until 2018.

As a result, the brokerage said, local HRC producers — SSI, G Steel Plc and Nakornthai Strip Mill — would have a decade to prepare.

Lower import tariffs on premium-grade HRC from Japan, mainly used in the automotive industry, would not affect local producers since they do not manufacture the product.

SSI shares closed on Thursday on the Stock Exchange of Thailand at 1.05 baht, down one satang, in trade worth 8.76 million baht.

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