Thailand drafts law to stamp out substandard steel

The Thai Cabinet has approved a draft bill this week that will allow the Industry Ministry to shut down mills in the country that produce substandard steel.

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The new law will stipulate the type of raw materials to be used and ensure the quality of products made in mills are in accordance with the Factory Act of 1992, Industry Minister M.R. Pongsvas Svasti told Thailand’s Bangkok Post newspaper.

Consequently, all steel plants in the country will have to produce steel according to the standards of the Thai Industrial Standards Institute, Svasti added.

A steel product is considered substandard if it does not meet its specified size and weight.

The new law could see a drop in the usage of substandard steel products, Prasit Rattanakijkamol, a steel analyst at Asia Plus Securities in Bangkok, said.

“If the government is serious in solving the substandard steel problem, it could easily identify the mills where the substandard steel in the market come from,” he said.

It is not clear how much substandard steel is circulating in the market, though some sources have said that as high as 40% buyers in the market are using it.

“The use of substandard steel is very common in Thailand. Substandard steel is cheaper, so many people in suburban areas or the countryside use substandard rebar and wire rod to build their houses,” Rattanakijkamol said.

“There is a [shortage] of rebar and wire rod in Thailand. We still need to import,” Wikrom Vajragupta, president of the Iron and Steel Institute of Thailand, said.

“Some small mills are taking advantage of the situation by rolling rebar in sizes that are smaller or lighter [than what is specified],” he said.

It was hard to catch these mills in the past because they were producing on and off, Vajragupta said.

“But with the new law, the government wants to make it clear that any companies that are caught producing substandard steel can be shut down,” he said.

Companies that produce quality steel such as Tata Steel Thailand, Bangsaphan Barmill, and Millcon will benefit if these plants are shut down, analyst Rattanakijkamol said.

Tata Steel Thailand – the market leader for rebar in Thailand, with a 25% market share, has said that it has been educating the market on the dangers of using substandard steel.

The draft bill follows a raid on two warehouses and a steel rod plant in Bangkok and Samut Sakhon provinces in January. They were accused of producing substandard steel rods for distribution nationwide.

The Department of Special Investigation (DSI), an agency under the Ministry of Justice in Thailand, raided a warehouse on Rama II Road in Chom Thong district, and confiscated 39,000 substandard steel rods weighing about 108 tonnes.

Another warehouse belonging to Worapaibul Metal Co located along the same road in Bang Khunthian district was discovered with 55,920 substandard steel rods weighing about 73 tonnes in its possession.

The third location, allegedly the production base, was a property belonging to BKK Steel Mill Co in Tambon Phanthai Norasing of Muang district, Samut Sakhon. The authorities found 13,900 substandard steel rods weighing 109 tonnes there.

The seized rods had a combined market value of about 16 million baht ($506,000).