Steel Prices Jump 15% in Thailand: Oil Crisis Impact

The Thailand steel sector is confronting a cascade of escalating production costs driven by the 2026 Middle East conflict, which has sent oil prices soaring to $130 per barrel and triggered what analysts are calling the largest supply disruption in global oil market history. For an industry that imports nearly all its raw materials, the impact is immediate and severe: shipping costs for iron ore have skyrocketed, electricity tariffs are rising, and profit margins are shrinking by double digits.

Why This Matters:

• Steel prices up 10-15%: Thai producers raised prices across all categories in April, with further increases likely in May—potentially exceeding 17% cumulative hikes in two months.

• Electricity costs rising: The Energy Regulatory Commission approved tariff increases for May through August 2026, adding another financial burden to manufacturers.

• Profit squeeze: Major producers face an anticipated 8-12% decline in net profits for fiscal year 2026 compared to 2025.

• Import dependence: Thailand lacks domestic iron ore, making the sector uniquely vulnerable to global shipping volatility and energy shocks.

The Iran War's Ripple Effect on Thai Manufacturing

The ongoing conflict has choked traffic through the Strait of Hormuz, a critical artery for global oil and liquefied natural gas supplies. Brent crude climbed from $80-82 per barrel in early March to approximately $130 in April 2026, and industry forecasts suggest prices will remain elevated throughout the year even after a potential ceasefire.

For Thailand's steel manufacturers, the pain is multifaceted. The country's complete reliance on imported iron ore and scrap steel means every uptick in fuel costs translates directly to higher freight expenses. By late March, bunker fuel costs for large cargo ships carrying iron ore from Brazil to China—a benchmark route that directly affects Thailand's import costs—surged from less than 50% to over 85% of total freight costs. Thai importers face similar dynamics on routes from Australia and other suppliers.

The iron ore freight rate on the major shipping route from Brazil to China reached $30.55 per tonne as of late March—the highest level since mid-2024. Meanwhile, the route from Western Australia to China stood at $10.6 per tonne. Thailand's proximity to these Asian supply chains means local importers are absorbing comparable cost increases, compounded by insurance premiums and fuel-related surcharges introduced by shipping lines.

Double Blow: Energy and Logistics

Beyond maritime freight, Thailand's steel producers are grappling with domestic energy costs. Many factories use fuel oil for production, and the spike in global oil prices has directly increased operational expenses. The Energy Regulatory Commission's decision to raise electricity tariffs for the May-August period adds a second layer of cost pressure, particularly for facilities running energy-intensive blast furnaces.

Transport within Thailand is also more expensive. The government's March 2026 emergency measures included support for the domestic transport sector—trucks, buses, and motorcycle taxis—an acknowledgment that freight costs are rippling through every supply chain. Yet these interventions offer only partial relief to industrial users facing sustained cost inflation.

Thailand's total imports of scrap metal and iron ore jumped 33.5% year-on-year in March 2026, while iron and steel imports rose 5.5%, underscoring the sector's continued demand for raw materials despite punishing prices.

What This Means for Residents

For consumers and businesses in Thailand, the steel price surge will manifest in several concrete ways:

Construction costs are climbing. Residential builders, commercial developers, and contractors working on government infrastructure projects will face higher input costs, which typically get passed on to buyers and tenants. New condominium projects and residential developments will be most immediately affected, as they rely heavily on fresh steel supplies. Expect upward pressure on housing prices for new condos and commercial lease rates, especially in urban centers. Existing home prices should remain relatively stable in the short term since they don't require new steel inputs.

For those planning construction or renovation: If you're considering a major project, consider locking in contracts with builders now before further price increases take effect. Alternatively, if budget allows, delaying non-urgent projects 3-6 months could save 5-10% in costs, depending on how global oil prices stabilize.

Rental prices: Short-term rental rates (within the next 6 months) are unlikely to change significantly, as most leases are locked in. However, property owners and developers planning new rental units will face higher construction costs, which may result in higher rental rates when new leases begin in late 2026 or 2027.

Infrastructure timelines could shift. The government's 10 billion THB soft loan program through the Government Savings Bank (a major state-owned financial institution) is designed to help small and medium-sized enterprises manage liquidity, but if steel costs continue rising, some private-sector projects may be delayed or scaled back. Public infrastructure—such as the railways and energy initiatives the government is prioritizing—should proceed, though budgets may require adjustment.

Industrial tenants and manufacturers using steel as an input (automotive, electronics, machinery) will see their own cost structures shift, potentially affecting pricing for consumer goods and export competitiveness.

Industry Response: Price Hikes and Policy Appeals

Thai steel producers moved swiftly in April, announcing price increases of 10-15% across all product categories. Some companies are signaling that if input costs remain elevated or climb further, May could bring additional adjustments, pushing the cumulative increase past 17% over two months.

The Federation of Thai Industries (FTI), Thailand's principal business advocacy organization, has called on producers to adjust business plans and urged the government to provide stronger support. Specifically, the industry is lobbying for anti-dumping measures to counter low-cost imports, particularly from China, and for greater use of locally produced steel in public procurement through the "Made in Thailand" scheme, a government policy that prioritizes Thai-manufactured goods in public sector purchasing. The logic is straightforward: if domestic producers cannot compete on price due to external shocks beyond their control, regulatory and policy support is essential to prevent plant closures and job losses.

So far, no widespread layoffs have been announced, and the industry has committed to maintaining employment levels. However, some executives warn that companies may be forced to temporarily suspend operations if the cost environment remains hostile and global market volatility persists.

A Strategic Pivot: Low-Carbon Steel and EAF Technology

Amid the crisis, a strategic shift is underway. The European Union's Carbon Border Adjustment Mechanism (CBAM), which entered full enforcement in 2026, imposes significant export costs on carbon-intensive steel. For Thai producers, this is both a challenge and an opportunity.

Manufacturers adopting Electric Arc Furnace (EAF) technology—which recycles scrap steel and produces lower carbon emissions—are positioned to better manage carbon costs and maintain healthier margins compared to traditional blast furnace operators. EAF-based producers can also differentiate their products for export to markets with stringent environmental standards, such as Europe and Japan.

The emerging electric vehicle (EV) sector and clean energy infrastructure in Thailand are creating demand for high-quality, low-carbon steel. Producers investing in this transition may capture new revenue streams that offset some of the margin pressure from rising input costs.

Government Intervention: Limited but Targeted

The Thai government's seven urgent measures approved in March 2026 address the energy crisis broadly but offer limited direct relief to the steel sector. Key initiatives include:

• Reviewing fuel excise tax reductions to manage domestic fuel prices.

• 10 billion THB in soft loans through the Government Savings Bank for SMEs, which can help smaller steel companies manage working capital.

• Support for the transport sector, which indirectly alleviates some freight cost pressure.

• Encouraging the fisheries sector to use B20 diesel, a cheaper fuel alternative (though not applicable to steel manufacturing).

The industry's calls for anti-dumping measures and prioritization of local steel in public projects have not yet translated into formal policy announcements. However, the government's commitment to maintaining infrastructure spending—with domestic demand expected to hold at around 18 million tonnes in 2026—provides some demand stability.

Outlook: Fragile Recovery, Persistent Volatility

Global dry bulk shipping forecasts suggest a fragile recovery in freight rates for 2026, with supply growing faster than demand in some vessel segments. However, Capesize rates—critical for iron ore transport—are projected to remain elevated due to longer sailing distances, particularly from the South Atlantic to Asia. The commissioning of Guinea's Simandou iron ore mine in late 2025 is expected to increase ton-mile demand, keeping rates high.

For Thailand's steel sector, this means the cost environment is unlikely to ease significantly in the near term. Geopolitical tensions, bunker fuel prices, and global supply chain volatility will continue to exert upward pressure on production expenses. The sector's ability to navigate this period will depend on a combination of price discipline, government support, and strategic investment in low-carbon production technologies.