Wednesday, November 12, 2008

Thailand to loose Iron and Steel project to Vietnam?

Sahaviriya threatensto move smelter abroad

Lack of support leads to rethink of location


Sahaviriya Iron and Steel Co (SIS), the prospective operator of the country's first iron smelting plant, is threatening to relocate its project to China or Vietnam where it sees more support from local governments.

Members of six environmental groups stage a rally in October at the provincial hall in Prachuap Khiri Khan against Sahaviriya’s planned smelter. CHAIWAT SADYAEM

Sahaviriya's executives met with Industry Minister Pracha Promnok yesterday to ask for a clearer stance by the Thai government on its project and added that without a helping hand, the company may consider relocating its project elsewhere.

Win Viriyaprapaikit, the acting president of SIS, said that establishing an iron smelter project in either China or Vietnam could save the company up to 90 billion baht out of its total investment budget that has been estimated at 500 billion baht.

"Both countries [China and Vietnam] offer generous incentives and infrastructure support packages to accommodate our planned project," said Mr Win, also the president of SET-listed Sahaviriya Steel Industry Plc, the country's largest hot-rolled steel coil manufacturer.

While the rival countries offer attractive packages, the Thai government has been reluctant to offer infrastructure support such as electricity and water utility services.

"We are evaluating the invitations from China and Vietnam. While China is obviously willing to support us on import taxes on machinery, Vietnam also offers high incentives and a good location for the project at a cheap rental cost," Mr Win said yesterday.

He insisted that the Thai government should pay more attention to its attempt to establish an upstream steel industry that further supported related industries along the downstream chain.

In addition, Mr Win said that if the project received the green light, at least 55,000 jobs would be secured and an additional 10,000 jobs would be created by the construction of the smelting plant.

He also suggested the Board of Investment (BoI) should extend its incentive period for this project, which would require a huge amount of investment.

The company's ambition to create the country's first smelting plant has been delayed for two years due to strong opposition by activists and local communities who fear the impact on their neighbourhoods. The project site is in Bang Saphan, Prachuap Khiri Khan.

The company plans five phases for the smelter development with a capacity of five million tonnes for the first phase. It recently secured long-term purchase contracts with iron ore mine operators from Australia, Brazil and South Africa.

The company plans to produce premium-grade steel products to tap into rising domestic demand in the automobile, electronic and electrical-appliance sectors for which Thailand is the regional production base.

SIS is still in the process of seeking approval for its environment impact assessment and is revising a proposal for promotional privileges. Once it receives BoI approval, the smelter could start to operate in two years.

Shares of SSI closed on the Stock Exchange of Thailand yesterday at 0.32 baht, unchanged, in trade worth 3.7 million baht.

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