Strong baht dents garment, rubber exports while fuel costs trip up trucks, trawlers
The garment, food and agricultural industries have been affected by the baht's appreciation in the first quarter and are expected to slow down in the rest of the year amid fierce competition, according to a Bank of Thailand (BOT) survey.
Soaring oil prices have hurt transportation, construction equipment and fishery industries, according to the survey of 82 companies.
In June, crude oil prices rose 129 per cent from 2003, causing hikes of 46 per cent and 76 per cent in gasoline and diesel retail prices. At the same time, the baht appreciated to an historic high, affecting exports, particularly those relying on domestic raw materials.
The garment industry slowed down continuously in the second quarter due to dampened exports. This was caused by the appreciating baht and fierce competition in the world market, particularly from low-wage countries such as China, Vietnam, India and Pakistan.
The industry was not affected directly by escalating energy prices but was hit indirectly by higher prices of raw materials, according to the survey.
"In the second half of the year, we expect that the industry will continue to slow down amid the higher competition in the global market," reported the survey.
The stronger baht also had an impact on the rubber industry. Most rubber-glove manufacturers posted a red bottom line as some companies, especially small and medium-sized ones, were closed down due to the appreciating baht and volatile rubber prices.
The BOT believes the processed-rubber industry will continue to face strong competition in domestic and export markets. But some have improved their cost management and production efficiency.
According to the survey, oil prices had a big impact on the transport industry, with oil costs accounting for 50-80 per cent of its revenue. Long-term contracts prevented companies from raising prices in accordance with higher costs.
Companies cut their prices amid fierce competition and the economic slowdown. As a result, the industry's margin declined by 10-15 per cent to 4-5 per cent. Some smaller firms went out of business.
The fishery industry has also been highly affected by oil prices, with fuel representing 60-70 per cent of total costs. The government's assistance could not lessen the increasing costs, the survey said.
The baht's appreciation reduced the petrochemical industry's ability to make a profit, despite expansion in the first half of the year. Its margin per unit has been diminished by rising oil prices.
The Nation
Monday, August 28, 2006