UpdateThailand floods take heavy toll on industrial production

12 October 2011 10:30  [Source: ICIS news]

(adds more details, with recasts throughout)

By Nurluqman Suratman

Thailand is hit by worst-ever floods in the last 50 yearsSINGAPORE (ICIS)--Widespread flooding in Thailand will shave the country’s economic output this year, slowing its GDP growth by as much as a full percentage point, given the heavy disruption caused on domestic production, industry sources and analysts said on Wednesday.

The Thai capital of Bangkok is on high alert as floodwaters from the central provinces could break through the protective barriers built around the city, they said.

In the provinces of Uthai Thani, Chai Nat, Sing Buri, Ang Thong, Suphan Buri, Ayutthaya, Pathum Thani and Nonthaburi, heavy rains caused rivers to overflow, with the water rushing where Bangkok lies.

Considered as Thailand’s worst in 50 years, the floods have swept across 60 of the country’s 77 provinces over past two months, killing at least 281 people and shutting down production at hundreds of factories, according to media reports.

The Thai economy is forecast to grow at 3.5% in 2011, barely half the pace of expansion recorded last year, according to the International Monetary Fund’s latest World Economic Outlook report in September.

With the devastation being wrought by the flooding, the projected slow GDP growth could be shaved by 0.6-0.9%, with the losses likely to be as high as baht (Bt) 80bn ($2.58bn), according to estimates of government agencies.

Some 1,215 factories encompassing various industries in 33 provinces are currently submerged in water, with some 41,099 workers affected so far, DBS Vickers Securities said in a research note.

In Lopburi province, Indorama Ventures Ltd has kept its wool yarns and polyethylene terephthalate (PET) polymers facilities shut since late September because of the floods, with no definite restart dates set, a company spokesperson said.

Thailand
is expected to sustain huge damage to its agricultural sector, estimated at Bt54bn ($1.7bn), according to DBS Vickers. For industries, the losses are forecast at Bt20bn; Bt9.8bn for trade, and; Bt5.7bn for tourism, the brokerage said.

Petrochemical production in the country will likely be unscathed with its primary location at Map Ta Phut in Rayong province lying safely in the eastern coast of Thailand, industry sources said.

“The floods will mostly impact downstream industries such as electronics and automobiles, but no significant impact on petrochemicals is expected,” Lertchai Kochareonrattanakul, a Bangkok-based analyst at Fitch Ratings.

“Most of the plants in the chemical sector are located in Chanburi and Rayong provinces, so they are still safe as they are located quite far away from the central areas,” he said.

The University of Thai Chamber of Commerce, meanwhile, pegged the losses of the flooding at Bt104bn, or about 1.0% of GDP.

“If flood waters reach Bangkok, total damage could rise by Bt20bn,” DBS Vickers Securities said.

Putting up additional flood barriers, as well as opening up of canals, is under way in Bangkok to protect the capital from onrush of floodwaters.

Within the capital, the 30,000 tonne/year expandable polystyrene (EPS) plant of Taiwan’s Ming Dih Group is operating normally, but sales have been affected by the flooding, said a company source.

“Distribution is the local market is problematic due to the flood”, the source said.

Meanwhile, a dwindling of demand from Thailand, linked to the flooding, was felt in the Asian butyl acrylate market, prompting regional sellers to reduce offers.

North of the Thai capital, the Ayutthaya province has been inundated with flood, affecting more than 349 factories and some 20,000 workers.

Rojana Industrial Park’s estate in the province that houses some 223 factories making automotive and electronics parts has been flooded since 8 October. Damages at the estate are estimated at around Bt50bn, according to DBS Vickers Securities.

The production facilities of Japanese automakers Honda Motor Corp and Toyota Motor Corp were among those affected by the flooding in areas surrounding Bangkok.

A disruption in supply of automobile parts can be expected next week, as floodwaters make transportation by rail and road difficult, said a source at a major Thailand-based automobile parts supplier.

“Most of the car manufacturers have already shut [production] except for General Motors and Nissan…I think they will shut soon as major suppliers have stopped distribution,” said the source.

The automotive industry is an important pillar of demand for petrochemicals and is also a large end-market for materials such as polypropylene (PP), nylon, acrylonitrile-butadiene-styrene (ABS), polyurethane (PU) flexible foam, synthetic rubber, as well as paints and coatings.

($1 = Bt30.97)

Additional reporting by Quintella Koh, Salinla Tulyasatien and Clive Ong

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By: Nurluqman Suratman



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