It is the first new investment announced following this year's purchase by India's Tata Steel Group of a 67-per-cent controlling interest in Thailand's Millennium Steel. The firm's name has been changed to Tata Steel (Thailand).

Company president Santi Charnkolrawee said construction of the mini-blast furnace would begin in next year's first quarter and be completed in the third quarter of 2008. Its environmental impact is currently being studied, and investment incentives are being sought from the Board of Investment.

Funds for construction will come from bank loans.

Santi said the mini-blast furnace would produce hot metal to support the auto industry. Carmakers need higher-quality steel - made from natural-iron raw material - than that produced from smelting scrap steel. The company will import its raw material from countries like Australia.

He said the mini-blast furnace was a first step for Tata, which expects to expand into other areas of the Thai steel industry. The Indian parent company plans to be the leader of the global steel industry by expanding its production capacity from 4 million tonnes last year to 30 million tonnes by 2015. It considers the Thai operation its Southeast Asian production base.

The Tata Group's strategy for gaining global leadership is to acquire top steelmaking companies in places like Southeast Asia, Europe and South Africa.

This year, it bought Singapore's NatSteel Asia and Thailand's Millennium Steel and is currently negotiating to acquire Europe's Corus Group, the world's eighth-ranking steelmaker, with an annual production capacity of 19 million tonnes.

Santi said membership in the Tata Group's worldwide network would enable Tata Steel (Thailand) to expand its business at home and throughout Southeast Asia.

The new plant will allow the company to advance beyond producing steel for construction to making steel for the auto industry, which attracts higher prices.

Although Tata Steel (Thailand) has a production capacity of 1.7 million tonnes a year, it is currently making only 1 million tonnes. Completion of the new plant will enable the company to work at full capacity, producing 500,000 tonnes per year for the auto industry and 1.2 million tonnes for the construction industry.

Santi said that while the company would produce steel of import quality for the auto industry, it planned to undercut the price of imports by an average of Bt1,000 per tonne.

At present, imported steel of auto-industry quality costs Bt12,600 to Bt15,840 a tonne.

Tata Steel (Thailand) expects sales volume of 1.1 million tonnes this year, up 3 per cent from last year. The company announced sales of Bt14.34 billion out of a total volume of 814,000 tonnes and a net profit of Bt274 million in the first nine months of the year.

Somluck Srimalee

The Nation