Building materials sector to benefit from reconstruction

The deadly tsunami that struck Thailand’s southern provinces on Sunday will boost the cement, steel, construction material and shipping industries, while tourism will only be affected in the short term, KGI Securities (Thailand) said yesterday.  The disaster should not be significant from an economic perspective as the affected provinces accounted for only 2.1 per cent of gross domestic product this year but the key concern is tourism, which is now in peak season.

"The broader economic impact of the tidal waves will likely soften economic growth in 2005 and drag the already decelerating corporate earnings growth."  Phuket alone generates US$2 billion (Bt78 billion) a year, 40 per cent of the country’s tourism revenue, it said. However, the building materials sector is expected to benefit from reconstruction after the catastrophe passes. Companies like Siam Cement, Dynasty Ceramic and Millenium Steel (MS) should benefit from that, it said.

There would be marginal positives for cement and steel sectors as there will be additional cement demand from renovation and reconstruction projects. MS should benefit from reconstruction, as its main product is construction steel. Ceramic tile will get a long-term positive impact as 20 per cent of DCC and Union Mosaic Industry’s sales come from the South.