Steel firms in meltdown
16:02, 2014/09/19
Domestic steel firms are struggling as the market suffers from acute oversupply, while tariffs are set to fall on imported steel from Russia in the near future.
The Vietnam Steel Association (VSA) recently filed a list of steel firms who have struggled to survive including 11 construction steel manufacturing and 10 steel ingot rolling firms.
Also according to VSA figures, Vietnam is able to turn out more than 11 million tonnes of construction steel, 9.29 million tonnes of steel billets, over 2.1 million tonnes of steel pipes, 3.28 million tonnes of galvanized steel and over four million tonnes of cold rolled steel per year. Yet domestic steel consumption equaled just 11 million tonnes last year.
In addition to the acute oversupply affecting the domestic market, giants Formosa and Hoa Phat Group are about to commission major new steel plants.
VSA’s former chairman Pham Chi Cuong noted the underlying weakness of the domestic market, claiming that steel firms had rushed into doing business based purely on a herd mentality.
“Short-term and spontaneous investments in conjunction with the use of backward technology have put lots of local steel firms on the verge of going bust,” Cuong noted.
Many localities have also exacerbated the situation by approving investment certificate in unnecessary projects.
According to a Ministry of Industry and Trade report in January 2009 reviewing the implementation of the Vietnam steel industry for the 2007-2015 period, 32 projects had been approved by localities that had no place in the national sectoral plan.
As far back as late 2009, VSA figures already showed that construction steel production capacity of existing factories and those about to enter operation had reached seven million tonnes per year, yet local consumption was only around four million tonnes per year.
In this context, VSA has proposed moratorium on casual construction steel plants.
If unplanned local over-production wasn’t already a problem, falling per cent tariff rates for imported steel from Russia will also be another factor as Vietnam and the Customs Union of Russia, Belarus and Kazakhstan are expected to sign a free trade agreement this year.
Russia ranked fifth in 2013 in raw steel production with 68.7 million tonnes and exported 23.6 million tonnes while Vietnam was at 26th position with 5.6million tonnes being produced.
In another development, in early September the Ministry of Industry and Trade imposed tariffs ranging from 10.71 per cent to 37.29 per cent on stainless steel products imported from mainland China, Taiwan, Indonesia and Malaysia in a move to protect the domestic market.
In addition to the acute oversupply affecting the domestic market, giants Formosa and Hoa Phat Group are about to commission major new steel plants.
VSA’s former chairman Pham Chi Cuong noted the underlying weakness of the domestic market, claiming that steel firms had rushed into doing business based purely on a herd mentality.
“Short-term and spontaneous investments in conjunction with the use of backward technology have put lots of local steel firms on the verge of going bust,” Cuong noted.
Many localities have also exacerbated the situation by approving investment certificate in unnecessary projects.
According to a Ministry of Industry and Trade report in January 2009 reviewing the implementation of the Vietnam steel industry for the 2007-2015 period, 32 projects had been approved by localities that had no place in the national sectoral plan.
As far back as late 2009, VSA figures already showed that construction steel production capacity of existing factories and those about to enter operation had reached seven million tonnes per year, yet local consumption was only around four million tonnes per year.
In this context, VSA has proposed moratorium on casual construction steel plants.
If unplanned local over-production wasn’t already a problem, falling per cent tariff rates for imported steel from Russia will also be another factor as Vietnam and the Customs Union of Russia, Belarus and Kazakhstan are expected to sign a free trade agreement this year.
Russia ranked fifth in 2013 in raw steel production with 68.7 million tonnes and exported 23.6 million tonnes while Vietnam was at 26th position with 5.6million tonnes being produced.
In another development, in early September the Ministry of Industry and Trade imposed tariffs ranging from 10.71 per cent to 37.29 per cent on stainless steel products imported from mainland China, Taiwan, Indonesia and Malaysia in a move to protect the domestic market.
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