Vietnam Steel Needs “Urgent Rescue”

In Quarter I of 2013, the steel sector saw a thriving increase in March’s consumption against the previous month. However, it was still lower than that in Quarter I of 2012, while the consumption of Vietnam Steel Corporation only increased by 4 percent (including price inflation).

 

According to the Ministry of Construction, the whole steel sector production in March was 270,000 tonnes, up by 13,000 tonnes against February 2013 but down by 80,000 tonnes (equal to 20 percent) year on year. The output in Quarter I of 2013 was estimated at 867,000 tonnes, down by 30,000 tonnes (equating 5 percent), due to low demand.

 

The consumption in March was estimated at 260,000 tonnes, increasing by 10,000 tonnes against previous month but decreasing by 135,000 tonnes year on year. The estimated steel consumption in Quarter I of 2013 was 910,000 tonnes, up by 30,000 tonnes year on year.

 

However, the steel inventory by March 15^th was about 330,000 tonnes, up by 50,000 tonnes compared with the same period last year.

 

Concerning imported steel, General Department of Customs figures show the import volume by March was 800,000 tonnes with value of US$574,000, down by 11.6 percent year by year. Despite this decrease, the volume of imported steel was still rather high in comparison with the domestic steel production and consumption.

 

The Vietnam Steel Corporation said that its total steel production in Quarter I was estimated approximately 303,00 tonnes, down by 13.7 percent year on year. Meanwhile, the construction steel volume was estimated at 266,200 tonnes, down by 14.7 percent against 2012.

 

According to the Vietnam Steel Association, the causes of the steel market remaining gloomy are frozen real estate market, oversupply, and pressure from the import of cheap steel from China into Vietnam, which created fierce competition for domestic steel and directly impacted domestic production. Besides, the input cost for steel production was escalating whereas selling prices (excluding VAT and discount) quoted by steel manufacturers are relatively stable; in the North, the prices normally range VND13.55 – 14.65 million/tonne for deformed bar steel and VND13.7 – 14.65 million/tonnes for round steel.

 

In the South, deformed bar steel is sold at VND16.32 – 16.97 million/tonne while the round steel rate is VND16.32 – 16.61 million/tonne. The actual selling prices at site (VAT excluded) are now VND 13.1 – 14.3 million/tonne for deformed bar and round steel in the North and normally VND13.5 – 14.2 million/tonne in the South.

 

The retail price in some localities was up by VND100,000 – 300,000/ tonne and ranges VND 16-18 million/tonne in the North and VND6.5 – 18.2 million/tonne in the South.

 

General Director Le Phu Hung of the Vietnam Steel Corporation said that despite the current difficulties in production and consumption, the Corporation is still implementing 2 core projects of Thai Nguyen steel – phase 2 and Lao Cai Steel Plant. It was expected that Lao Cai Steel Plant would release its first set of steel billet in July 2012. However, due to MCC contractor’s failure to reach the required capacity, the progress was hard to be met and the plant may only be able to produce products by the end of 2013.

 

In addition, the project of Thai Nguyen steel – phase 2 with productivity of 500,000 tonnes/year has its accumulation since the initiation to Quarter I of 2013 reached VND3,684 out of VND3,843 billion, beating 95 percent of the planned volume and disbursement rate. At the moment, the project implementation is lagging behind schedule. “The biggest challenge now is to adjust the investment rate,” said Mr Hung.

 

Also according to Mr Hung, the prolonged projects have influenced the investors’ finances. The loss for bank interest only is now up to VND700 billion. Hence, the Corporation needs direct support from the Ministry of Industry and Trade (MoIT) to quickly adjust investment rates in an appropriate manner. Moreover, the Corporation’s proposed re-structure has been approved, but the units do not operate effectively due to financial difficulties. There are also obstacles in its restructure, especially regarding new project implementation due to power supply such as: Hau Giang steel project is now having premise available and support from province, but electricity will not be supplied until February 2016 in accordance to electricity planning. Thus, until 2014 can the Corporation implement this project.

 

In the context of unsolved difficulties and the coming dry season, worries are rising among steel manufacturers. A variety of steel plants are operating perfunctorily and power outage during production has caused many plants to suspend operations, reducing the labour force. Long power outages will probably cause significant impacts on production, especially in the South, given the drought there. Thus, MoIT should consider supporting the steel sector somehow to ease its difficulties.