The Industrial Sector : Performance during the First Seven Months of 2005 and Outlook for the Rest of the Year

Transcription

1 1 The Industrial Sector : Performance during the First Seven Months of 2005 and Outlook for the Rest of the Year First Seven Months From January to July 2005, Thailand s industrial sector recorded a lower rate of growth than that posted in the same period last year. This was evident from the manufacturing production index for industries producing for domestic consumption as well as for export. The index for the first seven months of 2005 rose by only 5.6 per cent compared with 11.7 per cent for the same period of The slower growth was especially disappointing considering that the average capacity utilization increased to 70.9 per cent compared with 68.7 per cent for the corresponding period last year. By category, many industries have done quite well this year while a few have began to falter. 1.) Industries producing for domestic consumption :- 1.1) Strong performers :- - Soy bean milk. Capacity utilization up to per cent. Production index up 15.2 per cent. - Kraft paper. Capacity utilization up to per cent. Production index up 25.5 per cent. - Concrete. Capacity utilization up to 87.4 per cent. Production index up 36.1 per cent. - Commercial vehicles. Capacity utilization up to 80.7 per cent. Production index up 33.1 per cent. 1.2) Weak performers :- - Galvanized steel sheets. Capacity utilization down to 54.3 per cent. Production index down 29.4 per cent. - Passenger cars. Capacity utilization down to 58.9 per cent. Production index down 12.8 per cent. - Steel pipes. Capacity utilization down to 56.4 per cent. Production index down 15.5 per cent. 2.) Industries producing for export :-

2 2 2.1) Best performers :- - Hard disk drives. Capacity utilization up to per cent. Production index up 42.1 per cent. Hitachi, one of the world s top manufacturers, plans to invest Baht 8 billion to expand its operations in Thailand. - Compressors. Capacity utilization up to per cent. Production index up 10.6 per cent. - Tin metal. Capacity utilization up to 99.1 per cent. Production index up 64.7 per cent. - Natural rubber sticks. Capacity utilization up to 73.5 per cent. Production index up 29.3 per cent. 2.2) Worst performers :- - Leather and leather products. Capacity utilization was only 33.3 per cent. Production index down 10.8 per cent. - Keyboards. Capacity utilization was only 27.7 per cent. Production index down 39.6 per cent. - Computer screens. Capacity utilization was only 18.4 per cent. Production index down 50.3 per cent. 3.) Major export items :- According to the Department of International Trade Negotiations statistics, the value of all exports for the first seven months of 2005 totalled about US$ 61.3 billion, an increase of 13.7 per cent over the same period of Of the top 15 export items, only semi-conductors, natural rubber and rice posted lower earnings. 3.1) Top performers :- - Computers, parts and components. The No.1 export item in 2004, earning Thailand US$ 9.2 billion. Between January and July 2005, some US$ 6.2 billion worth were shipped out, an increase of 27.4 per cent over the same period last year. - Automobiles, parts and components. Ranked second in 2004, earning US$ 5.5 billion. Export value for January-July 2005 totalled US$ 4.2 billion, up by 39.7 per

3 3 cent from the same period last year. After shifting production bases to Thailand, several automakers have begun producing and exporting. - Plastic pellets. Export value totalled US$ 3.1 billion in January July 2005 export value was US$ 2.3 billion, up 40.6 per cent from the same period last year due to greater global demand and high prices. - Gems and jewelry. Total export value in 2004 was US$ 2.6 billion. January-July 2005 export totalled US$ 1.7 billion, 18.9 per cent higher than the same period last year. - Steel and steel products. Total export earning was US$ 2.5 billion in Exports during January-July 2005 totalled US$ 1.7 billion, up 30.7 per cent over the same period last year on account of climbing world prices and high level of global demand. - Chemicals. Export value totalled US$ 2.1 billion in January-July 2005 export value was US$ 1.5 billion, 43.5 per cent higher than in the same period last year. 3.2) Exports with higher volumes but lower earnings :- - Semi-conductors. Total export value in 2004 was US$ 5 billion. January-July 2005 export value was about US$ 2.8 billion, down 3.2 per cent from the same period last year. The slide in export earnings began in October 2004 due to inaccurate assessment of market demand by the world s major producers which led to a supply glut. This was followed by a cut in production worldwide. Since the middle of 2005, however, the situation seemed to have improved. The next upward cycle for the electronics industry was expected to start some time within the current year. - Natural rubber. Total export value was US$ 3.4 billion in January-July 2005 period s earnings totalled about US$ 1.9 billion, a decline of 3.4 per cent from the same period last year. - Rice. Total export value in 2004 was US$ 2.7 billion. Earnings for January-July 2005 period totalled about US$ 1.3 billion, a drop of 5.5 per cent. Trends for the whole of 2005

4 4 Industries likely to see high rates of growth :- - Hard disk drives, particularly the 2.5-inch size or smaller (used in personal computers, mobile phones and home entertainment equipment, all of which have seen fast sales growth). Production capacity for the industry has been fully utilized and expansion is necessary. But there are risks as price competition is intensified, especially in the market for the 3.5-inch disk drives which have seen rapid technological changes (its average production life is between six to eight months and its average market life is just a little over one year). Future competition will center on the ability to store more data, the smaller size and energy efficiency. In 2004, total export value was about US$ 3.2 billion. - Motor vehicles, particularly one-ton pickup trucks. Thailand has become a main production base for pickups. Global auto makers, shifting their production bases to Thailand in recent years, have begun producing and exporting the pickups. Next year (2006), Nissan is also moving in Export earnings in 2004 totalled about US$ 5.7 billion. January-July 2005 exports have earned some US$ 4.2 billion, up by 39.7 per cent from the corresponding period last year. - Motorcycles. Domestic sales are forecasted to slow down because the market is nearing its peak. The ratio of motorcycle ownership per capita in Thailand is 3.9 persons per unit compared to other countries in the region such as Malaysia (4.2 persons per unit), Vietnam (7.3 persons per unit) and Taiwan (1.9 persons per unit). Domestic sales in the first quarter of 2005 edged up by less than 1 per cent. Therefore, the emphasis for motorcycle manufacturing will have to be on export. The Federation of Thai Industries estimates that motorcycle exports in 2005 will exceed one million units for the first time, a sharp increase of nearly 40 per cent over the previous year. Motorcycle exports earned Thailand US$ 513 million in 2004, up 39.4 per cent from In the January-July 2005 period, export value has already reached US$ 381 million, an increase of over 39 per cent over the same period last year. - Automobile parts and components are not likely to do as well. Because of several agreements to set up free trade areas that Thailand has been negotiating, local automobile producers will soon be able to import high-quality

5 5 parts and components from abroad in place of those made locally. Local makers of substandard parts and components will be especially hard hit. - Construction materials. The construction of residential and commercial buildings is expected to slow down. Since the last quarter of 2004, the number of applications for construction permits has declined. The slowdown was also due to the rush to buy houses before the government s support of the real estate sector ended in late However, construction activities in the public sector, particularly those involving the megaprojects, will increase. Scheduled for the five-year period from 2005 to 2009, the megaprojects will see a total investment outlay of some Baht 1.7 trillion. Their construction works will keep the demand for cement, concrete, structural steel and other construction materials at a high level. - Petrochemicals. The industry has seen a steady growth since the fourth quarter of 2004 because it is about midway through an up cycle. Besides, demand has been greater than usual due to the rapid economic growth in China. Prices are expected to remain high for at least two or three more years. Major producers have therefore gone ahead with their expansion plans. Makers of containers and packagings, household electrical appliances, electronics, construction materials and motor vehicles have been using more plastic in place of other materials. Industries which should see improvements during the second half of the year :- - Semi-conductors. The global market still suffers from oversupply because of market miscalculation by major producers last year. Nonetheless, it is possible that the market may have already touched the bottom of the down cycle during this year s third quarter and will start recovering at the end of If the book-tobill ratio of the U.S. market for semi-conductors (40 per cent of the global market) is used to determine the industry s cycle, it is found that whenever the ratio drops below 1, the demand is less than the supply. Considering that each of the industry s cycles takes between 8 to 12 months, the ratio may have already reached its lowest point last February and has begun moving upward steadily. - Frozen shrimps. The industry has been plagued by a number of problems including toxic residue, infectious diseases and of being accused of dumping in the US market for black tiger prawn. The switch to white shrimp has largely been unsuccessful. Total export value in 2004 was US$ 809 million, a decline of 6.4

6 6 per cent. Exports during January-July 2005 period have earned US$ 490 million, an increase of 17.5 per cent over the same period last year. In early September, the E.U. has announced, as a temporary measure, import tariff reduction for Thai shrimps from 12 per cent to 4.2 per cent which is the same rate for Vietnam, Indonesia and other exporting countries in ASEAN. The rate for processed shrimps has also been lowered from 20 per cent to 7 per cent, effective 1 August 31 December The same rate will be levied from 1 January 2006 but under the GSP system. The critical issue is the quality which is strongly emphasized by the E.U. market. Thai shrimp exports must achieve the E.U. standard of quality to avoid the recurrence of past problems, particularly the toxic residue. Industries still having problems :- - Frozen chicken. Thai exports still face barriers due to the bird flu problem. Although the situation seems to have improved in the first half of 2005, the former level of buyer confidence for this Thai product has yet to be regained. Total export value in 2004 was US$ 44 million, down sharply, by 92.6 per cent, from the previous year. January July 2005 export figure is US$ 4.1 million dropping 90.4 per cent from the same period last year. - Computer parts and components. Thai exports in this category are not with very high-technology. Similar products from China have become formidable competitors.