Checks to prevent steel hoarding as prices rise

This article should be taught at school… as a perfect illustration of the secondary effects of any policy that distorts a market.

The Internal Trade Department will soon dispatch officials around the country to check steel inventories in a bid to discourage hoarding, which could aggravate the pain already felt by the construction industry.

“Some suppliers have declined to sell to construction companies, saying they are running out of quota,” a department source said last week.

Some steel-makers have been stocking up on speculation that the Commerce Ministry will soon approve a Bt7-per-kilogram hike in the steel price, he said.

The steel committee has proposed to raise the steel price by Bt3 early this month and by Bt4 in the middle of the month, but the move is still pending Commerce Minister Mingkwan Sangsuwan’s approval.

An industry source said the steel price did not deserve to go up by as much as Bt7.

The price of construction steel has kept rising from Bt18,000 per tonne last August to Bt35,000-Bt38,000 at present due mainly to speculation in the global market and high demand in China.

Contractors have cried over the steep price increase, which is the major factor pushing up construction costs by 25 per cent this year.

Those building public works are also asking for the government’s help in raising the project value. They threaten to leave jobs unfinished or boycott future bidding on government jobs.

The industry source said the government should allow imports of construction steel now that there is no reason for the state to prop up the local industry.

Imports of construction steel are subject to approval by the Thai Industrial Standards Institute, as an indirect measure to defend the local steel industry.

India-based Tata Steel has become the largest construction steel producer in Thailand, with a market share of more than 50 per cent, after it took over Millennium Steel, one of the country’s leading steel-makers, two years ago.

“So it’s useless to enforce this regulation to protect local steel-makers at this time. The government had better give serious consideration to liberalisation to relieve steel-related operators’ suffering,” the source said. (Nation)

So to summarize :

-First, a regulation was designed to protect thai steel producers… Imports were limited with “quotas”
-but now the first steel producer in Thailand… is indian
-meanwhile prices of steel have exploded on the world market
-so people now complain… they can’t import cheaper steel because of the first regulation !
-and meanwhile, local producers ask for higher prices, that the gvt refuses or delays (of course)
-therefore, suppliers start to hoard steel !

Talk about a nice thai mess…

It’s obvious that most of thai politicians and civil servants have reached their Peter Principle. They can’t control anymore the effects and secondary effects generated by the insane maelstrom of conflicting regulations they’ve created.

I remind you the Peter Principle : “In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.”  😉

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Thailand Crisis

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The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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