Aug. 11--Thailand's biggest steelmaker, Sahaviriya Steel Group of Companies (SVG), is looking for ways to better integrate its operations in a bid to strengthen negotiating power with global steel giants who are hunting smaller firms to acquire.

"We are aiming at investing in ore mining, pushing our 500-billion-baht smelting project to start as soon as possible, and a steel production plant overseas also is in our sights," said group president Win Viriyapraphaikit.

"In doing so we could achieve a goal of being the region's largest integrated steel producer.

"I have to admit that it is very difficult for us to keep a majority holding in the assets we founded," he said, adding that integration among its own businesses from raw materials to downstream products would ensure supplies of raw materials and lower its costs at a time of intensifying competition.

The world's largest steel company, ArcelorMittal, has set the tone for a global wave of consolidation in the industry, and has annual output of 120 million tonnes. Mr Win said the market leader's success had pushed other big contenders such as JFE, Nippon Steel and Posco to pursue similar strategies.

Surging demand for steel products over the past five years, coupled with capacity utilisation constraints, have been key catalysts. As a result, says Mr Win, a handful of gigantic players can wield huge influence on prices.

"With ArcelorMittal's output bigger than the combined capacity of all its peers, it can announce production cuts when steel market prices soften."

He said world steel prices were now completely controlled by a few groups from iron ore miners to steel producers, making it even harder for smaller players to survive, even when they are the beneficiaries of high prices.

Not only have steel producers been consolidating, but also more than 75 percent of the iron ore in the world is controlled by three operators that can basically dictate the prices of raw materials.

The iron ore prices have risen by 70 percent to 85 percent on average since early this year. The spot price of coking coal, the main fuel used in the steel industry, is up more than 300 percent to a record $365 a tonne from only $80 last year, while high oil prices have doubles freight costs -- a major concern for shippers of heavy products such as steel.

Mr Win said steel bar was $1,500 per tonne in July compared with $570 in June 2006, with steel sheet up to $1,200 a tonne from $600 at the end of last year

He said Sahaviriya's huge smelter would be a key weapon to help the company fight back against global market dominance by a few foreign companies.

The company, however, has faced three years of delays due in large part to protests by environmental activists and communities in Prachuap Khiri Khan.