Industrial Economic Status October 2009

The Office of Industrial Economics

Industrial Economic Status Report

December 2009

Summary of Industrial Economic Status

December 2009

Industrial Indices in November 2009

- The manufacturing production index (MPI) in November 2009 remained virtually unchanged from the previous month but increased 7.5% y-o-y. Industries where production continued to improve were hard disk drives (HDDs), petroleum products, electronics, and jewelry. The industries where production decreased were motor vehicles and apparel. The y-o-y MPI increased notably because of the low production numbers in November 2008, when the sector was hit hard by the global economic crisis.

- The average capacity utilization rate was 60.3% in November 2009, slipping from 60.9% in October 2009.

Industrial Economic Situation in December 2009

-  Textile and Garment Industry

·  Production and exports of textile products and garments should increase according to the incoming advanced purchase orders. A risk factor for the industry is the devaluation of the Vietnamese dong, which may force Thai entrepreneurs to reduce product prices in order to compete with Vietnam.

·  Exports should grow due to the positive trends of fashion garments. Unique designs and brand-building have been developed to increase competitiveness, which will reduce the price competition impact on Thai products.

-  Iron and Steel Industry

·  Long-steel production should decrease slightly in December 2009 due to the decline of domestic demand. While the raw material price of billets increased, the finished goods price of steel bars decreased. That caused manufacturers to reduce their billet imports remarkably, leading to decreased production of steel bars. Production in the structural steel section should increase because Siam Yamamoto Steel Co., Ltd., a large manufacturer located in Map Ta Phut, Rayong, was approved by the Administration Court to resume production from December 23, 2009, onwards after a production suspension since last October.

·  Flat-steel production should increase slightly y-o-y due to growing demand in related industries such as motor vehicles and electrical appliances.

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

Industrial Indices

Manufacturing Production Index

October 2009 = 180.32

November 2009 = 180.39 é

Activities contributing to increase of the MPI:

·  Apparel

·  Beer

·  Men’s, women’s, and children’s clothing

Capacity Utilization Rate

October 2009 = 60.9

November 2009 = 60.3 ê

Activities contributing to the lower rate:

·  Seafood products

·  Petroleum products

·  Basic chemicals

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

-  The total manufacturing production index was 180.37 in November 2009. It increased only slightly from the previous month (180.32) and rose 7.5% compared to November 2008 (167.7).

·  The main activities that caused the m-o-m MPI to increase slightly were the manufacture of apparel, beer, clothes for men, women and children, and HDDs.

·  The activities responsible for the y-o-y MPI increase were the manufacture of HDDs, petroleum products, electronics, jewelry, and plastic pellets.

-  The average capacity utilization rate was 60.3% in November 2009, which was lower than in October 2009 (60.9%) but higher than the figure a year earlier (55.8%).

·  The main activities that caused the average capacity utilization rate to decrease from October 2009 were the manufacture of seafood products, petroleum products, basic chemicals, animal feed, and plastic pellets.

·  The industries contributing to the y-o-y increase of the average capacity utilization rate were the manufacture of basic chemicals, iron, petroleum products, rubber products, and pulp, paper, and paperboard.

Industrial Activity in November 2009

-  The Department of Industrial Works (DIW) reported that 310 plants began operations in November 2009, a decrease of 14.60% from October 2009 (363 start-up plants). The number of jobs created dropped from 8,468 in October to 8,159 in November 2009, representing a 3.65% decrease. Investment capital grew from 14.44 billion baht to 21.16 billion baht, a 46.56% increase.

-  The number of plant openings increased 9.93% compared to November 2008, when there were 282 openings. Investment capital from plant openings was 17.56% higher than the 18 billion baht invested a year earlier. The number of jobs created decreased 24.02% from the 10,739 new jobs in November 2008.

·  The activities which had the most plants starting up in November 2009 were the manufacture of wooden furniture (27 plants) followed by the repairing and painting of motor vehicles (17 plants).

·  The activities with the highest level of investment capital in November 2009 were the manufacture of electricity or electric power at 5.75 billion baht followed by the manufacture of ready-mixed concrete and processed cement (stress duct) at 5.17 billion baht.

·  The activities that created the most jobs in November 2009 were the assembly of machines and engine parts of motorcycles (815 jobs) followed by the manufacture of knitwear (766 jobs).

-  The DIW reported 85 plant closures in November 2009, 2.30% fewer than in October 2009 (87 plant closures). The number of layoffs decreased from 4,779 to 2,144 over the month. The total amount of investment capital lost by the closures was 1.38 billion baht, higher than the 1.18 billion baht loss recorded in October 2009.

-  According to the DIW, the number of plant closures represented a 34.62% decrease from November 2008, when 130 plants closed. The investment capital lost due to plant closures in November 2009 was less than the 3.55 billion baht loss recorded in November of the previous year. The number of layoffs represented a yearly decrease, as 4,710 layoffs were reported in November 2008.

·  The activities with the most plant closures in November 2009 were the repairing and painting of motor vehicles (12 closures) followed by the manufacture of cut and sewn clothes, handkerchiefs, neckties, gloves and socks from cloth or leather (7 closures).

·  The activities that lost the most investment capital due to plant closures in November 2009 were the manufacture of plastic tools, utensils, household furnishing or decorations (386 million baht) followed by the manufacture of plastic containers (346 million baht).

·  The activities from which the most employees were laid off in November 2009 were the manufacture of cut and sewn clothes, handkerchiefs, neckties, gloves and socks from cloth or leather (512 layoffs) followed by the manufacture of plastic containers (261 layoffs).

-  The Office of the Board of Investment (BOI) reported that during January-November 2009 there was a total of 905 approved investment projects, 20.1% fewer than the 1,134 investment projects approved in the corresponding period of 2008. The 260.1 billion baht worth of investment capital for the 11-month period was 36.90% less than the 412.2 billion baht invested a year earlier.

·  Shareholders of BOI-approved investment projects during January-November 2009:

·  The activities with the highest level of BOI-approved investment capital during January-November 2009 were services and public utilities (118.5 billion baht) followed by metal products, machinery, and transportation equipment (46.4 billion baht).

Industry Status Reports

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

I. Food Industry

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Industrial Economic Status Report

December 2009

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Industrial Economic Status Report

December 2009

Production and export value in the food industry are expected to increase from the previous month, consistent with rising price levels. Domestic sales should experience a positive change as consumers increase their spending in response to higher confidence in the economy.

1.  Production

The overall production of the food industry (excluding sugar) decreased 0.8% m-o-m in November 2009.

Export products: Processed chicken, canned pineapple, and frozen and refrigerated shrimp dropped 7.4%, 5.2%, and 17.6%, respectively, due to the decrease of overseas purchase orders after the high order volume in the previous month.

Domestic products: Palm oil and chicken feed decreased 11.4% and 5.1%, respectively, because of insufficient raw materials and the rising material prices.

2.  Sales

Domestic Market

The domestic sales volume of food and agricultural products decreased 3.9% m-o-m in November 2009 due to rising oil prices forcing consumers to reduce their spending.

International Markets

The total export value (baht) of the food industry was down 1.0% m-o-m due to the appreciation of the baht. The y-o-y export value was up 27.7%. The export volume grew because the product volume of the world market was decreasing while the prices were rising; therefore, importers increased their order volume. Cassava products and sugar increased 137.0% and 62.6%, respectively.

3.  Trends

In December 2009, both production and exports should increase y-o-y in accordance with the rising product prices. In terms of domestic sales, production should grow as consumers increase their expenses in response to higher confidence in the economy.

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Industrial Economic Status Report

December 2009

II. Textile and Garment Industry

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Industrial Economic Status Report

December 2009

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Industrial Economic Status Report

December 2009

Production and sales of textile and garment products should expand in response to purchase orders, but there is a risk factor to be aware of.

Source: Industrial Economics Information Center,

Office of Industrial Economics

Source: Information and Communications Technologies Centers,

Department of Trade Negotiations, Ministry of Commerce

1.  Production

In November 2009, production of most products increased m-o-m, including textile fibers (0.3%), garments from knitted fabrics (30.0%), and garments from woven fabrics (14.4%). The production of textile products and garments from woven fabrics saw y-o-y increases of 24.9% and 3.7%, respectively. Production increased in preparation for the turn of the year.

2.  Sales

Domestic sales did not increase as much as expected m-o-m in November 2009.

Exports decreased 8.0% m-o-m. The products whose export volumes decreased were articles of apparel and clothing accessories (4.4%), garments in particular (4.4%), fabrics (6.5%), cotton yarns (2.6%), household textiles (200.7%), and synthetic fibers (15.6%). Compared to the previous year, exports increased 2.0%. The products with export volume increases were fabrics (13.7%), cotton yarns (35.8%), man-made filament yarns (35.4%), and synthetic fibers (69.1%). The markets that had an m-o-m export decline were the United States (3.4%), the European Union (7.2%), Japan (3.2%), and ASEAN (9.4%). On a y-o-y basis, the Japan and ASEAN markets grew 5.5% and 23.1%, while the US and EU markets dropped 20.4% and 1.9%, respectively.

3.  Trends

Production and sales of textile and garment products are projected to expand in response to purchase orders. A risk factor that should be considered is the Vietnamese dong’s depreciation. Thai entrepreneurs may be forced to reduce product prices in order to compete with Vietnam. However, overall exports should grow due to positive trends in fashion garments. Unique designs and brand-building have been developed to increase competitiveness, which will reduce the price competition impact on Thai products.

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

III. Iron and Steel Industry

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The Office of Industrial Economics

Industrial Economic Status Report

December 2009

The Steel Committee of the Organization for Economic Cooperation and Development (OECD) said the world steel market is gradually recovering, thanks to strengthening demand in Asia. However, the increasing imbalance between capacity and demand may lead to a slump in prices, a decreasing capacity utilization rate, plant closures, and job cuts.

1.  Production

In November 2009, industrial production decreased 4.72% m-o-m. The MPI of long-steel products dropped 17.36% due to decreases of steel bars (33.29%), wire rods (18.02%), and pre-stressed concrete wires (16.16%). The decreased MPI was a result of rising of billet prices. While production costs were up, manufacturers could not increase product prices due to slow domestic demand, forcing them to reduce production. Moreover, some manufacturers closed for maintenance. The flat-steel MPI went up 0.60% due to increases of chromium-coated steel sheets (55.60%), tin plates (14.70%), and cold-rolled steel sheets (14.02%). On a y-o-y basis, the industrial production increased 64.74%. Long-steel production went up 70.11% due to increases of wire rods (166.36%) and pre-stressed concrete wires (58.17%). The 75.70% increase of flat-steel production was caused by the increases of hot-rolled coil (182.43%) and chromium-coated steel sheets (173.13%). The reasons for the remarkable y-o-y growth were the low MPI as a consequence of the world economic crisis and the higher purchase orders.

2.  Metal Prices

In December 2009, the free on board (FOB) prices at Black Sea ports of the Commonwealth of Independent States (CIS) were higher than in November. The price of billets increased 5.73%, from US$393 to US$415 per tonne. The price of hot-rolled steel sheets was up 2.14%, from US$497 to US$508 per tonne. That of cold-rolled steel sheets increased 0.93%, from US$602 to US$608 per tonne. The price of slab was unchanged at US$410 per tonne. That of steel bars decreased 0.98%, from US$444 to US$440 per tonne.

3.  Trends

Production of long-steel products is expected to slip in December 2009 because domestic demand is slowing continually. The billet price has increased, but the finish goods price of steel bars has been going down. Manufacturers cut the import volume of billets, leading to a decline of steel bar production. The structural steel section should increase its production because Siam Yamamoto Steel Co., Ltd., was approved by the Administration Court to resume operations at its second factory located at Map Ta Phut, Rayong Province, on December 23, 2009, onwards after the suspension last October. Flat-steel production should increase slightly y-o-y due to the growing demand of related industries such as motor vehicles and electrical appliances.

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Industrial Economic Status Report

December 2009

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Industrial Economic Status Report

December 2009

IV. Motor Vehicle Industry

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Industrial Economic Status Report