TATA STEEL EXPECTS GROWTH IN DOMESTIC DEMAND AND ACTIVITY

       The government's Thai Khemkhaeng (Invest for Strength) stimulus package has given steelmakers hope in a gloomy scenario, even encouraging major manufacturer Tata Steel (Thailand) to sell only in the domestic market next year.
       Tata Steel president Santi Chankolrawee said the company will next year sell its steel only in the local market thanks to the stimulus plan, which will increase demand for steel in the country.
       "The economic stimulus package of the government has boosted the confidence of steelmakers," he said.
       He said steel manufacturers are banking on the Thai Khemkhaeng project, especially the water resource development, which is part of the package.
       Most of Tata Steel's revenue comes from the domestic market, accounting for about 90 per cent and the rest from exports, he said. The company prefers domestic sales to exports because of higher margin. However, the country's economic slowdown had forced the company to diversify risk by exporting to overseas markets.
       He said the steel industry in Thailand is expected to recover soon, which is reflected in the stable price of steel compared with the plunging price in 2008 after the financial crisis fully hit the global economy.
       He said steel used to record its highest price at Bt36,000 per tonne before the global economy was hit by the financial crisis, after which it dropped steeply to Bt15,000 to Bt16,000. All steelmakers suffered inventory losses.
       "However, the steel price currently is Bt20,000 per tonnes. We expect this trend for the next one to two years," he said.
       The company expressed confidence in its revenue for fiscal year April 2009 to March 2010, with expectations of a net profit even though it recorded a net loss of Bt167.89 million in its first quarter ended June 2009.
       Tata Steel (Thailand) predicts revenue for the fiscal year 2009 will reach Bt20 billion. Santi said the expected revenue was reflected by the increased capacity utilisation to 80 per cent, or 100,000 tonnes, a month from 60 per cent early. The figure is expected to reach 90 per cent, or 120,000 tonnes, a month, he added.
       Although things are looking up for the steel industry, the company still has concerns about the price war among manufacturers due to oversupply.
       Its parent company - Tata Steel Group - has set a policy that the operation in Thailand should not lose money this year.
       Tata Steel Thailand is the market leader with a 30-per-cent share.
       Santi said the company would resume its investment plan once the world economy recovers. It has cash flow of Bt3 billion, while its debt-to-equity ratio is 0.5 times. Because of its strong financial standing, it believes banks are willing to lend for the future investment.