The trend of steel prices in Thailand in the second half of the year 2023

In 2566 (2023), the trend suggests that the price of Thai steel is expected to decrease compared to the previous year but still remain high. This follows the global steel price direction, which has been decreasing due to reduced demand from major producer-consumer countries. However, the domestic demand in Thailand may be impacted by the delay in budget approval during the government transition period.

The research center of Kasikorn Bank believes that the price of Thai steel is likely to continue decreasing in the remaining months of the year. In the first five months, the average price index of construction materials, specifically steel and steel products, decreased by about 4% YoY. The main reason for this decline is the global steel price adjustment following concerns about the high-risk economic situation in several regions, particularly the demand in China, a major producer-consumer. Although steel consumption in China rebounded in the first three months of the year after the cancellation of the Zero Covid policy, the current trend shows a slowdown due to steel demand in the real estate sector remaining sluggish. Additionally, the energy prices have decreased this year, which eases the crisis situation, but the domestic demand in Thailand still remains cautious due to the high cost of living and political uncertainty that could delay the budget approval for the 2567 fiscal year, impacting new construction projects by the government sector. Furthermore, there is a possibility of increased steel exports from China to Thailand, which could further pressure the prices of Thai steel.

Nevertheless, the price of Thai steel is expected to remain high compared to the pre-COVID period due to increased production and management costs in certain aspects within the country. This includes the expected high electricity costs for businesses and the trend of rising minimum wages based on the government’s new policies, as well as high transportation costs driven by diesel prices, which are a major transportation cost component. Therefore, the research center of Kasikorn Bank estimates that the trend of Thai steel prices in 2566 will decrease within the range of -10% to -6% YoY (average steel price in the first five months of 2566 decreased by approximately -6% YoY). However, it is still necessary to monitor the economic slowdown in China because if it slows down more than expected, excess steel production capacity in China could be diverted to other countries, including Thailand. In such a case, it could cause a greater contraction in steel prices in Thailand than initially estimated. Additionally, there is also the issue of reviewing the effectiveness of anti-dumping measures that may create uncertainty for the future prices of Thai steel, particularly regarding the review of anti-dumping measures against hot-rolled coil steel products, both in coil and non-coil forms, from China and Malaysia. Thailand has previously imported a significant proportion of steel from China. If the implementation of anti-dumping measures against Chinese steel is terminated, it could lead to increased steel imports and further pressure to reduce the prices of flat steel in the country.

The impact of environmental measures on the Thai steel industry

The environmental issues may lead to a potential adjustment in the global steel prices, affecting players in the Thai steel industry with increased costs at different times. Amidst intensified environmental measures and the Net Zero trend between countries, global steel industry players are required to transition towards sustainable business practices (ESG) by investing in environmentally friendly technologies and production processes. The research center of Kasikorn Bank provides perspectives on the potential impacts on Thai steel industry players as follows:

• Thai steel producers and traders exporting to the European Union and the United States may be affected in terms of pricing due to the full implementation of the Carbon Border Adjustment Mechanism (CBAM) in 2569 (2026). This would result in higher costs of purchasing environmentally friendly raw materials/steel products compared to conventional steel for production and export.
• To maintain market share, Thai steel industry players, especially during the initial stages of technological transformation for environmentally friendly steel production, may face higher costs and have fewer players capable of making such changes. Exporting steel products to the European Union and the United States is expected to experience the impacts before other players in the Thai steel industry. The level of impact depends on the importance of these markets to each player.
• The shift towards Net Zero goals in the steel-related industries could impact some players in the Thai steel industry, particularly those exporting to large international companies in industries that have clear goals to reduce GHG emissions and require the use of environmentally friendly raw materials in the production of end products. For example, the automotive industry aims to achieve Net Zero and has set a target to reduce GHG emissions by 65% by 2573. This trend leads to an inclination of global automotive manufacturers to use Green steel for producing cars and components. This will impact steel producers, traders, and users in Thailand who need to source or use environmentally friendly raw materials before losing their customer base. Moreover, it creates opportunities to gain new customers.
• In the short term, affected players in the Thai steel industry may seek environmentally friendly raw materials/steel products in limited quantities to produce and export to markets with trade policies/international companies that have a demand for such materials. Meanwhile, the domestic market still faces pressure from consumer behavior and other major export markets, as Thailand is a country in ASEAN with less stringent international environmental measures.
• However, in the long term, the global steel industry along the supply chain is expected to gradually adapt to the increasing demand for environmentally friendly products and the possibility of implementing CBAM in other countries. Additionally, the Net Zero trend in steel-producing countries, especially those that are major importers of Thai steel, such as Japan (33%), China (24%), and South Korea (10%), could lead to a new baseline adjustment in global steel prices based on higher production costs. This would make it challenging for all players in the Thai steel industry to avoid the increased costs of raw materials/steel products until the overall global steel industry can produce with new technologies that lead to economies of scale, resulting in lower steel prices. 

In practice, Thai steel producers should gradually adjust to maintain their competitiveness in the long term. The key strategies for adaptation are as follows:

1. Carbon footprint assessment and reduction: Steel producers should assess the amount of carbon emissions from their manufacturing processes to efficiently plan and reduce their carbon footprint. Using Electric Arc Furnace (EAF) technology and exploring alternative energy sources such as biomass or Green H2 are direct options to reduce carbon emissions. However, the readiness of the energy sector to support these changes at a commercially viable cost needs to be considered.
2. Indirect carbon emission reduction: Implementing clean energy in manufacturing facilities, such as producing electricity from renewable sources, adopting rail transportation, and purchasing or supplying Green steel products, can indirectly reduce carbon emissions. These are additional strategies that Thai steel producers can utilize to further reduce their environmental impact.
3. Certification and government support: Government support remains crucial in assisting steel producers during the transition phase. Various support measures and incentives, along with creating motivations for environmentally-friendly steel production within the country, can enhance their competitiveness and reduce the risk of accessing capital. Individual businesses should also focus on effective cost management capabilities.

Overall, these appropriate strategies will help businesses in the Thai steel industry gradually adjust to mitigate the potential impact of increased costs from raw material prices and carbon taxes in both domestic and international markets. Moreover, it will enhance their adaptability and competitiveness in the long run.

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