(Adding details throughout)
By Silvia Antonioli
NEW YORK, June 19 Thailand's Sahaviriya Steel
Industries PCL (SSI) expects to return to profit by the
first quarter next year even as growing Chinese imports and
softening steel prices continue to bite, the company's President
Win Viriyaprapaikit said.
"The second quarter will be a loss but a smaller loss than
in the first quarter," Win said in an interview on the sidelines
of AMM's Steel Success Strategies conference in New York.
SSI, Southeast Asia's largest fully integrated steel sheet
producer, reported a net loss of 2.8 billion baht ($89 million)
in the January-March quarter, mainly due to losses at the
British unit, SSI UK.
But earnings will improve due to higher sales volumes in
Thailand, he said.
"In the fourth quarter there is a good possibility that we
will make money. In the first quarter next year we definitely
His comments came after the first cargo of steel slab, a
semi-finished steel product produced at SSI's newly-acquired UK
plant in Teeside, arrived at its re-rolling mill in Thailand
SSI restarted the blast furnace, which has capacity of 3.5
million tonnes per year of steel slab, in April after buying the
Teeside Cast Products integrated mill from Tata Steel
in early 2011.
The company will ramp output up to 85-95 percent of capacity
in the third quarter, with the plant expected to be close to
full capacity by the year-end, Win said.
Although most of the Teeside slab will be shipped to
Thailand, some of it will be sold to third parties and SSI is
already in touch with potential buyers, mainly in the United
"We already have interest from many customers who want to
start using this product. Many of them have used this product
from this plant before," Win said. "Currently the market in the
U.S. is stronger than in Europe so we are focusing on that
In Thailand SSI sees steel demand increasing by 4 percent to
15.5-15.6 million tonnes this year, but it has to battle for
market share with imported steel, especially from China.
China had an 18 percent share of the Thai hot-rolled-coil
market in the first quarter this year, up from less than 5
percent one year ago, Win said. Chinese steel is gaining the
biggest share in the construction sector.
"It's quite a significant number but not every market
segment can use those (Chinese) products. The automobile
customers for example need a product tailored for their
requirements and want just in time delivery so the Chinese
products cannot get in that market segment," Win said.
"We have a few market segments we are competitive in and we
are not losing market share: the high-end automotive sector, the
energy and transportation industries."
SSI aims to focus on higher-end steel production which is
less exposed to competition from imports and plans to invest
downstream into cold-rolled sheet production and coating.
The industry is also challenged by softening steel prices
while raw material prices remain firm, which is squeezing
steelmakers' margins, he said.
SSI buys iron ore for its blast furnace mainly on long-term
contracts with prices adjusted every month or twice a month.
"It is our choice to buy on shorter term because we want our
costs to be in line with the market as much as possible," Win
"We also sell most of our steel on monthly basis although
for carmakers we mainly sell on quarterly of six-month basis."
To manage the raw material price risk, SSI is looking at
steel derivatives, instruments recently introduced which are
gaining popularity among financial and industrial players.
"We are not yet using derivatives but we are studying it,"
"There is still not quite enough liquidity in the market for
that yet, but I think in the near future there should be more
liquidity and it should be a tool that we can use to hedge."
(Reporting By Silvia Antonioli; Editing by Josephine Mason)