Though the inspection tours finished one week ago, no information about the inspection outcome has been released. A source from the Ministry of Finance said that the inspection tours had found out that the five inspected steel mills all made profit in 2006 and the first half of the year.

The five steel mills are the Thai Nguyen Cast Iron and Steel Company, the Southern Steel Corporation, Vinakyoei, Vietnam-Australia Steel Company and Hoa Phat Steel Company.

The source said that the Ministry of Finance would report to the government about the inspection tours before the report was made public. It remains unclear about when the ministry will announce inspection results.

Among the five mills, Vinakyoei reportedly made the highest profit thanks to low production and management costs. While other steel mills consume 34-40 litres of oil and spend $50 for one tonne of laminating steel, Vinakyoei uses 27 litres of oil only and spends $30. Moreover, due to having good financial capability, Vinakyoei has a large reserve of ingot steel, 30-50,000 tonnes. Despite the lower production cost, the company still sold steel at the same price levels as other companies, which allowed it to make fat profit.

In fact, people guessed that steel mills were making profit despite the increased ingot steel price even before the inspection tours.

Between June 2006 and June 2007 was a difficult period for steel companies since the ingot steel imported from China was more expensive than the imported finished steel, and local steel mills had to compete fiercely with China-sourced rolled steel. At that time, China-sourced rolled steel sold for VND300,000/tonne cheaper than Vietnamese products. A lot of steel mills had to temporarily halt production. However, no steel mill incurred losses at that time, and the steel industry still gained the growth rate of 20% in 2006.

Since June 1, 2007, the ingot steel sourced from China has been increasing sharply as the Government of China raised the ingot steel tax on ingot steel exports to 15%. However, Vietnamese steel mills, anticipating the ingot steel price increase, tried to reserve ingot steel in large quantity. In May 2007, Vietnamese steel companies imported a large volume of up to 400,000 tonnes. Up to now, local steel mills have been producing steel with cheap ingot steel.

It is estimated that in June and July 2007, steel companies made the profit of not less than VND1mil per tonne sold. Meanwhile, the escalating price has delayed many construction works. In the first half of 2007, the state had to spend VND1,800bil more on construction works using state-sourced capital due to the higher steel price.

As the steel price increase had bad impacts on people’s lives, the government had to lower the import tax on ingot steel to 2% from 5%, and decided to take inspection tours of steel companies. It was interesting that steel prices began decreasing by VND100-150,000/tonne, and then by VND200-300,000/tonne, when the inspection tours began, though China-sourced ingot steel price kept rising.

Right after the inspection, several steel companies said they planned to raise steel prices as the ingot steel price had climbed to $550/tonne.

Source: VietnamNet.