Shougang eyes ASEAN flat market with Thai project
Sources report that Chinese steelmaker Shougang will invest $2.4 billion to establish a four-million ton annual capacity steel mill in
Thailand.
Shougang actually began negotiations with a Thai counterpart last year. The Chinese steelmaker plans to undertake this project while at the same time relocating from Beijing to the island of Caofeidian in Hebei Province.
On July 16, 2004, an eight-member delegation, including a representative from
Thailands Ministry of Industry, visited Shougang. A six-member delegation then paid a follow-up visit to Shougang on January 4, 2005. Then, on January 11, 2005, the president of Wei Chengfa Group, Wu Guangwei, visited Shougang.
Wei Chengfa Group,
Thailands largest steel enterprise, was established by
Thailand-born Chinese. Every year, it imports large quantities of flat products. In 2004, Wei Chengfa Group asked the research institute of Anshan Steel to draft a feasibility report for establishing a four-million ton annual capacity steel mill in Bangsaphan.
Chinas Vice Premier Wu Yi and Minister of Commerce Bo Xilai, along with more than a hundred people in industrial and commercial circles, attended a
Thailand-
China economic and trader meeting held in northern
Thailand on September 22, 2005. A delegation of four people, headed by Wang Qinghai, general manager of Shougang, met with some large-scale steelmakers in
Thailand.
As reported by SteelOrbis last month, after the meetings,
Thailand Ministry of Industry Secretary General Chakramon Phasukavanich indicated that Shougang plans to invest THB 10 billion ($2.42 billion) to set up a steel mill in
Thailand. The mill, likely to be established east of Bangkok in Rayong, would mainly produce
billet, HR and CR products.
Some insiders are not optimistic about the move by Shougang. Although the potential demand for steel products in
Southeast Asia is strong, is not likely that demand will skyrocket in the short term.
The insiders feel that it would be difficult for Shougang to set up a large scale thin sheet mill in
Thailand since the steelmaker does not possess advanced
manufacturing technology for thin products. There are also capital pressures that Shougang would have to deal with.
However, some insiders favor this move. They feel that it would be wise for Shougang to invest in a
plate mill in
Thailand since most ASEAN (Association of Southeast Asian Nations) members mainly focus on long products like
wire rod. ASEAN members imported nearly 10 million tons of steel last year, among which 3 million tons were from
China.
Thailand would be a pilot market for Shougang.
Baosteel and Anshan Steel are each striving to achieve a
production capacity of 20 million tons, while Shougangs
production is closer to 10 million tons. The success of a steelmaker depends greatly on its
production scale, so Shougang has to keep pace with the giants.
However, the relocation problem has long bothered Shougang.
Construction has just begun in Caofeidian, and it will not be ready to go into
production until 2007. The current weak domestic market situation and the release of the New Steel Industry Development Policy make it impossible for Shougang to set up mills whenever and wherever it pleases. Thus, establishing steel mills in foreign countries can be a way for steelmakers to elude domestic regulative policies.
The iron and steel industry is becoming an important mainstay in
Thailand and is undergoing rapid development. 2004 iron and steel output in
Southeast Asia was 17.86 million tons. The apparent
consumption in 2005 and 2010 is expected to be 48.82 million tons and 63.76 million tons respectively, which provides
China with ample opportunity to expand its market.
SteelOrbis Shanghai