Thailand's flood damages 30 billion yuan in automobile spare parts

The continuous heavy rain since July has caused Thailand to suffer the most floods in half a century. Not only agriculture, many industrial areas in Thailand have been flooded, and Thailand’s economy has suffered heavy losses. However, the emergency transfer of manufacturing has made it possible for some of the key industries' global supply chains to survive the disaster.

On October 19, the Bank of Thailand will hold a monetary policy meeting. Currently, the market expects Thailand is likely to reduce its economic growth forecast this year to 4.1%. Earlier, the Bank of Thailand estimated that the national losses caused by floods were as high as 120 billion baht (approximately RMB 24.9 billion). The economist's estimate is even greater and he believes that the direct economic loss will reach 150 billion baht (about 31.1 billion yuan).

Nomura Securities predicted in its Asian Economic Monitoring Report released on October 18 that at the monetary policy meeting on the 19th, the Bank of Thailand will keep interest rates unchanged because the impact of severe flooding may have negative effects on Thailand’s economic growth and inflation outlook. influences.

However, Thailand is not Japan, and it has not caused similar uproar after the earthquake in Japan in the global manufacturing industry chain. Chen Fengying, director of the Institute of World Economy at the China Institute of Contemporary International Relations, said in an interview with this reporter: “The massive earthquake in Japan in March caused a serious impact on the global supply chain for at least six months. However, the loss of industrial parks caused by flooding in Thailand, It will soon be supplemented by manufacturing in Myanmar, Laos and other places."

Electronics and auto parts hit Bangkok, Thailand's capital city, fleeing the flooding on the evening of the 15th. However, due to the highest water level in the Chao Phraya River for 300 years, peaks, high tides, and heavy rains may occur at the same time between the 16th and the 18th. Bangkok, which accounts for 41% of Thailand's economy, will face a new round of challenges.

As Thailand has become one of the major suppliers of electronic and automotive parts, camera components and computer components in Asia and even in the world, the news that its related industrial parks continue to suffer from flooding and stoppages has constantly tested the patience of the market. .

At present, a large number of factories in the north of Bangkok have been flooded, while Thailand's traditional industrial bases - five industrial parks in Ayutthaya were flooded, and nearly 200 factories were closed. Among them, 84 foreign-owned factory workers in Bangbain Industrial Park were relocated. go. On the afternoon of the 17th, a total of 190 large-scale factories in the Nava Nakong Industrial Park, the largest industrial park in Thailand, were also flooded. According to sources from the Thai Ministry of Industry, at least 930 factories across the country have been affected.

The automobile manufacturing industry is the most damaged. Water intake at several plants at the Honda plant in the north of Bangkok reduced its global production capacity by 4.7%. Honda is currently forced to stop production this weekend. Toyota, Isuzu, Nissan, and Mitsubishi also extended the shutdown date to this weekend. Some analysts pointed out that last week alone the loss of auto parts suppliers was at least 3 billion baht (about 620 million yuan).

At the same time, industries such as camera components and computer hard disk manufacturing suffered losses. According to foreign media reports, U.S. hard drive maker Western Digital and chip makers Onsemiconductor and Microsemi, which are located in the Rojana industrial zone, have suspended or delayed their production progress in Thailand.

The impact on global supply is less than that in Japan. However, the floods in Thailand did not cause similar uproar in the global industrial chain after the earthquake in Japan.

“Although in the automotive and electronic components industry, Thailand occupies an important part of the industrial chain, but the factories in the affected areas are only labor-intensive to undertake manufacturing links, and the substitution is very strong.” Chen Fengying said, “This is as a global automobile. It is totally different from Japan where electronic components are developed, invested, and manufactured."

In fact, since the floods in late July, Honda, Toyota, Ford and other companies with important production bases in Thailand have begun to urgently shift their production bases and look for alternative suppliers to produce key components. The industrial layout in neighboring Myanmar, Laos, and Vietnam is very similar to Thailand, and industrial transfer is not empty talk.

Canon has stated that its ink jet printer manufacturing operations in Thailand will be moved to Vietnam.

Chen Fengying believes that at present, global production capacity is actually surplus, so short-term shortage of Thai production and supply will not be fatal to these industries.

Another good news is that in Japan, which has played a more important role in the global industrial chain, the economy has gradually recovered and it is expected that it will continue to increase production. This will increase the incentive to look for alternative suppliers outside of Thailand.

Takahide Kiuchi, chief economist of Nomura Securities Japan, predicted that after the earthquake in Japan, production was severely reduced in the past six months due to spare parts supply problems. Consumers have a large amount of backlog demand; at the same time, too low inventory needs to be raised to a reasonable level. Therefore, Japanese automakers will rapidly increase production.

At present, Japan’s auto manufacturing production increased by 1.7% year-on-year in August, which was the first increase since the earthquake. Automakers plan to increase production substantially in October to offset the impact of severe supply cuts caused by supply chain disruptions after the earthquake. These companies are making preparations, such as recruiting temporary workers and arranging holiday overtime. These actions have also been extended to auto parts manufacturers.

In fact, in addition to the economic losses during the flood, Thailand's post-disaster reconstruction will trigger new market demand.

At present, apart from manufacturing losses, Thailand’s agricultural sector suffered even more losses. This has led to an increase in the prices of agricultural products such as rice and rubber on the international market, which will have a small impact on the market in the short term. After the floods, how Thailand will restore its economy will also have a certain degree of impact on the global commodity market.

Zhou Fangye, an expert on Thailand at the Asia Pacific Institute of Chinese Academy of Social Sciences, believes that for the new Thai Prime Minister Yingluck, the real challenge is after the flood disaster. The reconstruction after the disaster is a time to rebalance the forces and risks of all parties. The economic policies will have an indirect impact on the global market.