G Steel Shares Fall 17% in Thai Stock Exchange Debut

Shares of G Steel Pcl (GSTEEL), Thailand's second-largest hot-rolled coil steelmaker, fell 17 percent in their trading debut on the Thai stock exchange on concern increased output from China will drag selling prices lower.

The stock plunged 0.27 baht to 1.33 at the 4:30 p.m. close in Bangkok. The Bangkok-based company was the year's first new listing on the Thai exchange.

Global steel prices may average 15 percent less this year than in 2005 because of growth in Chinese output, National Bank of Australia said last month. Prices for benchmark hot-rolled coil steel fell 17 percent last year in the U.S., 35 percent in Europe and 30 percent in Latin America, according to data from London-based publishing company Metal Bulletin Plc.

``The steel industry will continue to be under pressure due mainly to supply from China,'' Anongnuch Cheewaratanaphan, an analyst at KGI Securities (Thailand) Pcl, said in a note to clients today. ``With price pressure from oversupply in China since 2005, G Steel would be somewhat less competitive in the export market, especially in China.''

The company last week raised 2.4 billion baht ($61 million) from the sale to local and overseas investors of 1.5 billion shares, or a 15.5 percent stake, at 1.60 baht a share. The shares were sold near the lower end of the 1.55 baht to 1.70 baht price range.

Plant Expansion

G Steel said it intends to use part of the share sale proceeds to help fund a $320 million plan to increase capacity at its plant in Rayong province, 200 kilometers (124 miles) east of Bangkok. The plant expansion, to be completed by September 2007, will help boost the company's annual capacity by 89 percent to 3.4 million tons from 1.8 million tons.

In June 2003, Thailand's bankruptcy court approved a plan by G Steel, formerly called Siam Strip Mill Pcl, to restructure 65 billion baht of debt, rejecting opposition by some lenders, including Citigroup Inc. The company now has 6.76 billion baht in debt, including $100 million it raised in October selling unsecured bonds.

G Steel reported profit dropped 52 percent to 206.9 million baht in January to September from a year earlier on lower sales after global steel prices fell.

The company expects demand for steel in Thailand, which is still a net importer of the material, will increase at least 5 percent annually in the next five years because of an increase in construction work and rising production by automakers.

Government Spending

``The market is growing in Thailand and we expect a 5 to 6 percent increase yearly in the medium term, five years at least, and that's why we are expanding,'' Ryuzo Ogino, a company director, said in an interview in Bangkok late yesterday. ``That's without including the government's mega-projects.''

Thailand's government has announced plans to spend as much as 1.7 trillion baht to build roads, railways and other public works projects over five years to help modernize the country and boost economic growth. Prime Minister Thaksin Shinawatra is due to give more details on the projects and terms for international bidding at a government-organized conference on Jan. 26.

In 2004, Thailand's consumption of hot-rolled coil steel rose 5.6 percent to 5.7 million tones, of which 3.9 million tones were produced locally, an 18 percent increase from a year earlier. G Steel had a 22 percent market share, compared with 35 percent for its larger rival Sahaviriya Steel Industries Pcl (SSI), and 10 percent for Nakornthai Strip Mill Pcl, according to data handed by the company to investors.

G Steel, which ships steel to North America and the European Union, gets more than 80 percent of its total sales from Thailand, according to KGI Securities.

To contact the reporter on this story: Dominic G. Diongson in Bangkok at ddiongson@bloomberg.net; Laurent Malespine in Bangkok at lmalespine1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell in Seoul at sfoxwell@bloomberg.net

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