Temporary Safeguard Measures Applied to Some Imported Steel

According to the General Department of Vietnam Customs, imported steel billet volume into Vietnam in 2015 increased more than 3 times over 2014 (from 590,000 tonnes to nearly 1.89 million tonnes) and imported long steel volume also climbed nearly 50 per cent (from 900,000 tonnes to 1.3 million tonnes). Preliminary data also showed that domestic steel makers are suffering from the strong rise in imports.

 

The volume of steel ingots and long steels imported into Vietnam soared in the first two months of 2016. Notably, steel billet imports in January 2016 reached 339,768 tonnes, an increase of 231.83 per cent from January 2015. Average imported billet price in January 2016 was US$269 per tonne, down 67.6 per cent from a year earlier.

According to inspections from the Ministry of Industry and Trade, most domestic steel ingot producers were seriously affected by the steep decline in Chinese steel ingot prices, particularly in 2015 when it slid 27 per cent. Many domestic ingot producers had to suspend or scale down operations. For instance, Viet Trung Steel Company, which has an annual production capacity of 500,000 tonnes, had to stop production and faced bankruptcy. The company started operations in 2014.

 

Based on billet import data and price development, inspectors calculated and proved that there were signs of pushing down steel prices in the domestic market. The decision on application of provisional safeguard measures is made on the basis of investigation conclusions and checks in place, thus going in line with WTO rules and Vietnamese laws. Detailed investigation report was sent to all stakeholders to ensure the transparency of investigations.

 

In response to the remark that the new policy will protect a few big producers not consumers, the Ministry of Industry and Trade admitted the new approach helps temporarily protect steel-makers and ingot producers in the country.

 

Besides, no steel company holds a controlling market share (over 30 per cent). As for steel billet, the market has 14 big producers with 73 per cent of market share in combination and hundreds of smaller companies hold the remaining 27 per cent. Hoa Phat Group is the biggest billet producer with nearly 25 per cent of market share. HHI Index of the steel billet market is 1,390, an indication showing the moderate market concentration.

 

As for long steel, Vietnam has 21 big companies with a combined market share of nearly 93 per cent, with Hoa Phat Group being the biggest with nearly 20 per cent of market share, and dozens of smaller makers share the rest of 7 per cent. HHI Index of the long steel market is 741, classified as an unfocused market.

 

According to local media, after the temporary safeguard duties are applied, steel prices climbed. The Vietnam Steel Association (VSA) attributed domestic price hikes to the rise by US$100 per tonne of steel ingot imported into Vietnam on global surges.

 

Prices of long steel and steel billet will go up to a certain level to ensure a reasonable profit for the domestic steel industry, not any specific producers. This matches the objectives of safeguard measures and helps reduce losses in the domestic steel industry. Given stockpile data and production capacity, steel companies can hardly take advantage of safeguard measures to seek unreasonable margins, which harm consumers, said the Ministry of Industry and Trade.

 

Besides, to ensure that all aspects are taken into careful consideration before making the final conclusion, on March 17, 2016, the Ministry of Industry and Trade sent a request to all claimant companies to report on their selling prices of steel ingot and long steel before and after the application of temporary safeguard measures. In addition, the ministry also sent a dispatch to the Vietnam Steel Association, requiring it to coordinate with its members to monitor prices of steel ingot and long steel and notify the ministry in case of needing measures to stabilise the market.