Siam City Cement PCL, majority-owned by Holcim, said Thursday it will shutter two kilns from early 2008, due to higher production costs and sluggish domestic demand.
Annual output of clinker, a cement ingredient, will be cut by 2.25 million tons out of total capacity of 12.3 million tons, Thailand’s second-largest cement producer said in a statement.
The company may reopen the two kilns once the economic situation improves. "We don’t know yet about the timing to reopen the two kilns. It could be one to two years, and largely depend on the economic situation," said Siam City Cement spokesman Staporn Phettongkam.
Thai consumer spending and business investment was dented in aftermath of tainted elections and a coup last year, and is still showing only tentative signs of recovery.
The company expects the cost of coal and electricity, both major production expenses, to continue rising sharply next year. On top of the rising production costs, the baht’s appreciation has dented export revenue, it said.
Siam City Cement had net profit of THB2.82 billion ($83 million) for the first nine months of the year, down from THB3.21 billion a year earlier, due to lower sales and higher costs.
The company estimates some 100 to 200 staff out of a total of 2,400 are likely to take voluntary redundancy.
Following the production cut, Siam City Cement expects its exports next year will be reduced by 2.25 million tons from the 5 million tons expected for 2007.
Domestic cement sales in 2008 are likely to be maintained at around 8 million tons, Staporn said.
"It will be purely our cement exports that would be affected from the shutdown," he said.
Total cement sales this year are likely to be steady around 13 million tons, he said.
Thailand’s cement consumption this year is forecast to decline by 3% to 5% from around 28 million tons in 2006.