Industrial Economic Status Report – May 2006
Office of Industrial Economics
Industrial Economics Report
May 2006
Summary
Industrial Index of April 2006
- The manufacturing production index for April was 147.77, reflecting a decrease from March 2006 (178.64), but a year-on-year increase from March 2005 (140.71).
- The decreased manufacturing production index, compared with March 2006, includes the production of automobiles, office machinery, accounting equipment and calculators, sugar, yarn preparation and spinning, including textile weaving, and plastic product manufacturing.
- The average production input rate was 63.17, reflecting a decrease from March 2006 (73.03) and from March 2005 (63.54).
Industrial Economic Situation in May 2006
- Production and exports have started to slow down in response to sluggishness in the world economy. Next month, production and exports may also slow down as a result of the continued increase in the cost of fuel and the strength of the Baht. Domestic sales may slow down due to an increase in inflation that will cause the cost of production to go up and the price of goods to increase.
- Production and sales in the textile and garment industry in May and June was originally expected to expand slightly, due to strong exports. This was as a result of the stronger Thai Baht, the suspension of free trade talks, increasing gasoline prices, neighboring countries receiving GSP trade incentives from the USA, and increasing raw material imports that are the result of import prices that are lower than domestic prices.
- Steel industry output in May 2006 was expected to remain unchanged from the previous month. The production of long steel remained stable due to a slowdown in the real estate sector, which was the result of a decrease in demand, inflationary pressure, and an increase in interest rates. For flat steel, an upward trend has been predicted due to growing demand in the export market.
- The automobile and motorcycle industry in 2006 was trending upward. The industry was estimated to manufacture 103,000 units, with 55% for domestic sales and 45% for export.
- In May 2006, it was estimated the production and domestic sales of cement would increase slightly compared to the previous month, during which there were several national holidays. For June 2006, production and domestic sales were expected to decrease in response to the onset of the rainy season when construction work slows down. Export sales were predicted to increase as manufacturers had established a plan to shift their sales efforts to overseas markets.
- Electrical appliance manufacturing in May 2006 slowed down because of the increase in interest rates and fuel prices, as well as the continued strength of the Thai Baht. The production and sales trend in the second quarter is expected to reflect a slight decrease but an increase in production has been forecast in the third quarter. Electronics production in May 2006 was expected to increase because the world’s demand for consumer electronics, especially cellular phones and computers is increasing.
Industrial Economic Situation
Prepared by Office of Industrial Economics
- Manufacturing production index
March 2006 = 178.64
April 2006 = 147.77
Main industries that caused the index to decrease include:
o Automotive manufacturing
o Office machinery, accounting equipment, and calculator production
o Sugar production
- Average capacity utilization rate
March 2006 = 73.03
April 2006 = 63.17
Main industries that caused the index to decrease include:
o Automotive manufacturing
o Yarn preparation and spinning, including textile weaving
o Office machinery, accounting equipment, and calculator production
I. Food industry
Production and exports have slowed down in response to the continued sluggishness of the world’s economy. Production and exports next month are expected to slow, due to the increase in fuel prices and the continued strength of the Thai Baht. Domestic sales are also expected to slow, due to an increase in inflation, which causes the cost of production and the price of goods to increase.
1. Production
Overall production decreased 16.1% from last month, but increased by 8.6% year-on-year. Products that registered an increase in exports compared to last year were frozen and refrigerated chicken (9.3%), canned tuna (16.0%), canned pineapple (2.3%), and cassava flour (19.4%). Production for domestic consumption increased by 7.7% for hog feed and by 14% for palm oil and sugar. The significant increase in sugar output from last year was due to an increased harvest of sugarcane at the end of the extracting season, which caused sugar plants to accelerate production to accommodate domestic market demand.
2. Marketing
1) Domestic market
The value of food consumption decreased from the previous month by 9.2% but increased by 4.3% from the same month a year ago. This was due to the upward movement of food prices in response to increasing fuel costs, which is one of the major costs in the transportation of goods. In response, when consumers’ expenses increased, their purchasing power diminished.
2) Overseas market
The quantity and value of exports increased by 2.4% and 1.3%, respectively, when compared to the same month last year. Major export products were canned tuna (value increased by 4.8%), processed chicken (11.9%), and refrigerated and frozen prawns (27.4%). This was due to the psychological impact the importers had towards fuel price speculation and the news on the spread of the avian flu in Africa and Eastern Europe. With regards to sugar, world market demand decreased and caused the quantity and value of sugar exports from Thailand to decrease 43.8% and 23.8%, respectively.
3. Trend
It was predicted that production and exports would slow down because customer order volume has started to decrease in accordance with the stable world economic growth. Increasing oil prices and the continued fluctuation of the US currency caused Asian currencies to strengthen. Nevertheless, there were positive factors, such as Japan’s continued economic growth and the European Union’s concern over the spread of the avian flu, which might have impacted export expansion, especially of disease-free meat products from Thailand.
II. Sugar Industry
Sugar
Production – In the first quarter 2006 sugar production was 4,316,222.64 tons. This includes 1,974,967.86 tons of raw sugar or 46% of total sugar production with the rest in the form of white sugar and purified white sugar. Sugar production in March this year was 847,191.55 tons.
Consumption – In March 2006, domestic sugar consumption was 211,625.38 tons, an increase of 8% over the previous month. In the first quarter 2006 consumption totaled 605,888.81 tons, an increase of 6% over the same period in 2005.
Export – In March 2006, sugar exports totaled 165,837.83, an increase over February 2006 when exports totaled 106,599.48 tons. A total of 356,188.28 tons of sugar were exported in the first quarter of 2006. This number includes 140,084.86 tons of raw sugar or 39% of total sugar export. The export quantity in March of this year decreased by 57% from the same period of 2005.
Import – In the first quarter 2006, sugar imports totaled 7,263.48 tons. This includes 982.00 tons of sugar imported in March 2006, which was a 100% increase over the same period 2005.
Molasses
In March 2006, molasses production totaled 447,070.16 tons, reflecting an increase of 58% from the same period in 2005. The production in the first quarter of 2006 totaled 1,933,073.63 tons. March 2006 exports totaled 43,570.84 tons, approximately 2% of the 128,266.02 tons produced in the first quarter of 2006.
III. Textiles and garment industry
Textiles and garment production and sales were expected to increase slightly in May and June, especially in the overseas markets, because of the stronger Baht, the suspension of free trade talks, increasing gasoline prices, competing countries receiving GSP incentives from the USA, and increasing raw material imports which were cheaper than the local raw materials.
1. Production and sales
In May 2006, the manufacturing production index for textile yarn decreased by 13.1% from the index for April. Similarly, the industrial production indices for fabrics and garments decreased 18.1% and 20.3%, respectively. This was due to the fact that there were fewer working days in April. In addition, the unstable economic situation and stronger Thai Baht caused the customers’ orders to decrease, which then resulted in a decrease in both production and sales.
2. Exports and export markets
The value of overall textile exports in April 2006 decreased in all product categories by an average of 26.0% from the previous month: garments (-32.8%), brassieres (-30.7%), fabric (-21.6%), cotton yarn (-22.6%), artificial yarn (-16.5%), home fabric (-29.5%), embroideries and laces (-14.7%), and artificial fiber (-5.2%). The only exception silk garments, whose exports increased by 8.3%.
Major export markets were the US, EU, ASEAN, and Japan, in these respective quantities: 34.5%, 18.1%, 12.7%, and 6.9%.
3. Imports
In April 2006, textile and garment imports decreased by 5.8% from the previous month. Most notably, weaving yarn imports decreased 4.0%. The majority of imports were from the US, Australia, and India. For fabrics, imports decreased 6.4%, with the majority coming from China, Taiwan, and Japan. For garments, imports decreased 9.3%, mostly from China, Hong Kong, and Italy. For other textile products, imports decreased 2.1%, mainly from China, Japan, and Hong Kong.
Increased imports were noted in weaving yarns (up 3.0%) from China, Japan, and Taiwan.
Textile machinery imports in April 2006 increased 4.2%, the majority of which came from Japan, Germany, and Taiwan.
4. Trend
Textile and garment production and sales were expected to increase slightly in May 2006, especially in the overseas markets as a result from the stronger Thai Baht, the suspension of free trade talks, increasing gasoline prices, neighboring countries (Laos, Cambodia, and Vietnam) receiving GSP privileges from the US, all of which affected consumer confidence. In addition, there was also an increase in raw material imports because they were cheaper than local raw materials.
IV. Iron and steel industry
“US Trade Department lifted its anti-dumping measures towards hot-rolled steel sheets from Thailand’s Sahaviriya Steel Industry after finding no evidence that the company was dumping its products. The US Trade Department also lifted its investigation on Nakorn Thai Stripped Mill and G Steel Company after it was discovered that there were no exports of hot-rolled steel sheets from these two companies to the US.”
1. Production
Steel production in April 2006 slowed down from the previous month. The production index in April was 145.39, a decrease of 6.53%. This decrease was the result of a 41.40% decline in production of hot-rolled structural steel and an 8.47% decline in flat steel production. Within this group the production of cold-rolled sheet steel showed the greatest decrease of 22.23%. This situation came about because the trend for the price of steel was increasing. Manufacturers, therefore, stocked smaller amounts of raw materials and had to adjust their sales plans to accommodate their old inventory.
Chromium-coated steel sheet production declined by 15.52%, while zinc plate production declined by 15.24%. Production of long steel remained stable at 2.62%. In this group, steel wire production registered the greatest decline (19.67%), followed by deformed bars (14.29%). The slowdown of the Thai economy and the rise of interest rates caused the private sector’s real estate business to slow down and mega projects in the government sector were delayed.
Steel wire production increased by 49.08%, an anomaly brought about when a production plant stopped its production in order to repair its machinery, thus causing the production in April to appear to have increased. When compared to the production in April 2005, the output of the plant actually slowed down by 7.19%. Hot-rolled structural steel production declined by 32.45% and production of cold-rolled steel sheets declined by 25.61%.
2. Metal prices
The average change in the FOB price for metal in the CIS market at the Black Sea Port in May 2006 increased from the previous month. The average price of all metals went up. The prices of flat steel increased 23.64%, from US$313 to US$387 per ton, while the price of hot-rolled steel sheet increased by 11.65%, from US$472 to US$527 per ton. The prices of cold-rolled steel sheets increased by 6.82%, from US$557 to US$595 per ton while the price of steel billets increased by 6.20%, from US$355 to US$377 per ton. The price of steel bars by 2.68%, from US$410 to US$421 per ton.
3. Trend
It was predicted that the situation for the metal and steel industry for May 2006 would remain the same as in the previous month. Long steel production remained unchanged because the slowdown in the real estate sector continued, especially in residential estate development. This situation was created when market demand decreased as a result of an increase in inflation and an increase in interest rates which, in turn caused prospective buyers to postpone home purchases. For flat steel, it was estimated that prices would increase because of increased purchase orders. Manufacturers expanded their sales to export markets, resulting in an upward trend in the production of flat steel.
V. Automotive industry
Automobiles
The automotive industry slowed down in April 2006 compared to March because the long national holidays in April resulted in a decrease in the production volume. Moreover, most automotive manufacturers have accelerated their exports since March. Information for the automotive industry in April is as follows.
- Automobile production was 85,166 units, down by 26.77% from 116,298 units in February, but a 10.64% increase from April 2005.
- Automobile sales were 53,560 units, down by 18.97% from 66,101 units in March, and down 4.22% from sales in April 2005. The sluggish sales were due partly to the continuous increase of gasoline prices and partly to the tenuous situation of Thai politics, which caused some consumers to delay purchasing decisions.
- Automobile exports were 35,972 units, 32.86% less than the 53,578 units exported, but 18.69% higher than the volume of exports in April 2005.
- The trend was that the automotive industry would expand in May. It was estimated that production would reach 103,000 units, 55% of which would be for domestic sales and 45% for export.
Motorcycles
When compared to the previous month, the production output of the motorcycle industry slowed down because of the traditional long national holiday period in April, a situation which causes motorcycle sales to slow down every year. In anticipation of this situation, manufacturers stepped up production and sales in March in order to finalize their record for the first quarter. The information for the motorcycle industry in April is as follows: