Infrastructure projects to be major driver

Thailand's steel industry is expected to grow by 15-20% this year, helped by the government's infrastructure investments, although political uncertainties could still affect the industry, says Wikrom Wajragupta, president of the Iron and Steel Institute of Thailand (ISIT).

"We projected this year's demand to be at least 11.5 million tonnes. If we are lucky the number might rise to 13 million tonnes," Mr Wikrom said yesterday.

This year the steel industry should see positive signs, with the government's Thai Khem Khaeng programme starting to have an effect, he said.

"Currently, we expect the industry to grow by around 15-20%, as we hope that politics should not be a main issue," said Mr Wikrom. "Even if there are political problems, such as dissolving Parliament, it will not cause problems for the steel industry. However, if clashes occur, the effect would be in line with the severity of the situation."

He said steel prices would remain volatile until April when new negotiations on the prices of coal and iron ore are expected.

The ISIT has employed a Thai consulting company to perform an in-depth study on setting up an upstream steel industry, which will incorporate the Industrial Estate Authority of Thailand's idea of an "eco-industrial town" focused on raising the living standards of the surrounding communities.

The two areas chosen for the study are Thailand's eastern coast in Rayong and Chanthaburi provinces, or the country's southern coast.

"Within a week or two we will start working with the consultant. After the study has finished, the issue will be presented to the cabinet for approval, and conditions will be set for investors to follow according to the rules. I hope that by that time the Map Ta Phut issue will be solved," said Mr Wikrom, referring to the legal impasse over environmental and health impact rules.

The government last year received investment proposals from four big steel producers - Nippon Steel of Japan, Posco of Korea, Arcelor-Mittal of India and Baosteel of China - to build an integrated steel smelter.

"Nippon Steel has not yet backed out - and going to Burma, as rumoured, is not its aim due to logistics, since Burma is on the other side of the Gulf of Thailand, whereas the market is on the opposite side," he said.

Mr Wikrom added that China's move to cool its economy by telling banks to curb lending should have positive results, by preventing China from expanding production capacity to the point that it hurts other steel producers around the world.

China's demand for steel currently runs at 500 million tonnes.

"Thailand is not naturally suited to exporting basic products such as steel, because material such as ore needs to be imported. The country is more suited for exporting ready-made products with added value," said Mr Wikrom.

The ISIT along with Sahaviriya Steel is holding the Thailand Steel House Contest 2010 under the theme of "Innovative Living Steel" to promote new technology in steel for construction. Contestants can apply until Feb 28.