Steel industry struggles as foreign competitors flood Thai market
Imports of Chinese steel as well as rising energy costs are sending Thailand’s steel industry into a downward spiral
Increased competition from foreign companies is forcing closures in Thailand’s steel industry. Global geopolitical issues are significantly impacting the industry, with China emerging as a technological leader capable of producing massive quantities of steel while controlling costs. As a result, China has captured a substantial share of the global market, including in ASEAN countries and Thailand.
According to the Federation of Thai Industries (FTI), despite overall growth in the Thai steel industry, many factories are shutting down due to rising energy costs, including electricity and fuel.
China is pushing its exports of steel more than ever before as a result of the downturn in its real estate sector which is leading to a reduced overall demand for steel at home.
Kriengkrai Thiennukul, chairman of the FTI, noted that the current situation has led to increased steel exports from China, which benefits from cost advantages. In the first half of 2024 (January-June), China exported 53.4 million tons of finished steel products, a 24% increase compared to the same period last year.
If this export trend continues, total steel exports for 2024 are expected to reach 106.8 million tons, approaching the record high of 110 million tons in 2015, or the highest level in nine years.
In contrast, Thailand’s steel imports from China during January-June 2024 amounted to 2.397 million tons, up 0.9% and accounting for 43% of Thailand's total steel imports.
The utilisation rate of Thailand's steel production capacity is at its lowest in seven years, standing at 29.3% for the first half of 2024, compared to 31.2% in 2023 and 33.4% in 2022.
According to the Industrial Standards Institute (ISI), non-standard products valued at over 344 million baht were found, with steel and construction materials being the highest at over 126 million baht, representing 37%.
Additionally, the Thai steel industry is facing competition from Chinese steel companies investing in local production. The FTI reports that Chinese firms have invested in steel plants with a combined capacity of 12.42 million tons. Given that Thailand's steel demand for 2024 is only 16 million tons, domestic production now closely matches domestic needs.
The Thai steel industry must seek new export markets while contending with higher costs if it is to avoid even more factory closures.
It is hoped that the government will recognise the importance of limiting the establishment of additional foreign steel plants in Thailand. Without such measures, the Thai steel industry may face complete closure, eventually resulting in foreign companies dominating the market.
