Thailand should establish an upstream steel smelter to accommodate increasing local demand, despite strong opposition from environmentalists, said Industry Minister Suwit Khunkitti. Domestic demand for steel is expected to surge in response to the government's megaproject investments and industrial growth, especially in the automobile sector. This could create the need for am integrated steel industry, Mr Suwit said Southeast Asia consumes 40 million tonnes of steel a year but only Malaysia and Indonesia have upstream smelters. In Vietnam, where demand is rising fast, the Indian-based Tata Steel has committed to investing in an upstream project since last year. Thailand, the biggest steel consumer in the region, needs 13 million tonnes of steel yearly and spends up to US$9 billion annually on steel imports, yet it still does not have its own upstream smelter.

''This is a risk for the country if we have to rely on somewhere else for supplies,'' said Mr Suwit. ''How can we ensure a consistency of supply and problems on quality control?'' He said the government welcomed the investment proposals of four big steel producers _ PFE steel, NSC Steel, Arcelor-Mittal and Baosteel to build an integrated steel smelter. ''Their investments will bring about innovation in the local steel industry, attract a lot of foreign investment inflows and respond positively to greater domestic demand,'' he said.

Mr.Wikrom Vajaragupta, the director of the Iron and Steel Institute of Thailand, said that each of the four interested companies was expected to spend at least 100 billion baht on its proposed investment. Even though details on their investments have not yet been agreed upon, Mr Wikrom said the government had to work out details of infrastructure and manage environmental concerns quickly to prevent investors from going to other countries such as Vietnam or Indonesia. Mittal has also shown an interest in investing in Indonesia, Mr Wikrom said. ''If they shift their investment to Indonesia because there are too many obstacles in Thailand, Thailand will lose this foreign investment income. Their investment would add a lot of value to our steel industry and reduce our import spending.''

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