The global steel industry was faced with many challenges in 2011 and H1/2012, arising from the adverse external environment, soft international steel demand and volatile raw material prices. Thailand was hit hard from both the global economic uncertainty and local massive flooding, causing the GDP year on year growth in 2011 to drop to mere 0.1% compared to the plan of 4.5%. Overall, the country’s steel production and exports declined significantly as the floods disrupted supply chains and operations in Q4/2011.

Domestic steel consumption increased by 3.3% year on year to 14.5mn tonnes in 2011, much lower than the 31% increase in 2010. The Iron and Steel Institute of Thailand (ISIT) estimated that steel consumption in 2012 would grow by at least 5%, driven by post-flood reconstruction spending from both the public and private sectors. The growth in the demand for steel would also be supported by a significant expansion in the automotive and electronic industries.

Many domestic steel companies were badly affected by the severe floods and global economic slowdown, which eroded their operating margins. Going forward, more resilience in operating results is expected as plants resume production to normal levels and sale volume increases.

Key Points:

• Thailand’s steel consumption registered a slower growth of 3.3% to 14.5mn tonnes in 2011, accounting for the largest share (28%) among the ASEAN countries.

• Domestic production of finished steel products fell by 6.7% to 9.3mn tonnes in 2011 as a result of the devastating floods.

• Thailand should see a 4.5% to 5.5% GDP growth in 2012 attributed to the government’s income generating policies and recovery in the industrial production sector after the floods.