SOARING raw material costs have sparked a huge fall in profits at new Teesside Cast Products owner SSI.
The Thailand steel giant saw operating profits slump 80.8% to 284m baht (£5.7m) in the first three months of the year, while revenues were down 13.9% to 12bn baht (£240m).
The decline was attributed to higher input costs, a 13% drop in sales of hot rolled steel and slowing demand in Asia following the earthquake in Japan.
The company was also hit by 291m baht (£5.9m) of costs associated with the TCP takeover, which was completed in March and will create at least 800 jobs.
SSI said the acquisition will allow it to boost sales of hot rolled coils from 2.24m tonnes last year to 3.5m tonnes in 2012, with production on Teesside due to start in October.
Once the Redcar plant is operating at full capacity, SSI plans to ship 3.5 million tonnes of steel a year to Thailand - and eventually boost that further towards the 10 million tonnes a year achieved in Teesside’s 1970s heyday.
The company said: “With the acquisition of Sahaviriya Steel Teesside, SSI is now ASEAN’s (Association of Southeast Asian Nations) largest fully integrated fiat steel producer.
“SSI’s operation now spans across borders and from upstream to downstream steel products, the first global steel maker from ASEAN.
“As for the outlook in 2011, the global and domestic steel industry has been supported by strong demand from the recovery of the world’s major economies.”
Industry groups are predicting another steel boom after the industry was hit particularly hard by the recession. The World Steel Association forecasts that demand will rise 5.9% this year to a record 1.36bn tonnes, with similar growth in 2012.
Meanwhile the Iron and Steel Institution of Thailand said local steel consumption would total 15.5 million tonnes this year, up 14% on 2010.
SSI is keen to capitalise on the upturn in fortunes and is already touting the world for new business. The company said it had won four new customers in the first quarter, with six more in the pipeline.