The report by VSA sent to the ministries yesterday September 12 showed that the import ingot steel price was $389/tonne on average in 2006, while it rose four times from May to August 2007 to $485, $513, $523 and $530/tonne respectively.

The ingot steel price has been pushed up to the highest ever level in history since September 2007, as the supply of ingot steel became limited as the result of the Chinese policies on limiting semi-finished steel exports.

In recent offers, suppliers required $570-580/tonne CFR. With the import ingot steel price at $550-560/tonne, the Vietnam Steel Corporation (VSC) will be dead sure to have a loss if it maintains the current selling prices. Once steel mills cannot get enough profit for reproduction, the market would suffer a serious shortage of finished products, when Vietnam is entering the high construction season.

Pham Chi Cuong, Chairman of VSA said that the market is now very tense, and that VSC has reported heavy losses in August as it tried not to raise the selling prices as required by the Government.

Mai Van Tinh, Chairman of VSC, said that the corporation has asked its members not to raise the selling prices in the last time, however, the member companies have been facing a lot of difficulties. Most of its members, including joint ventures, either took losses or just broke even in August. The total loss the member companies have suffered may reach VND10bil. Especially, Nasteel Vina, VPS have reported the loss of VND2bil for each in August.

Currently, the selling prices of VSC’s members are always VND200,000/tonne lower than other steel producers. The Thai Nguyen Cast Iron and Steel Company, for example, is selling rolled steel at VND9,645,000/tonne and bar steel at VND7,795,000/tonne. The Southern Steel Corporation is selling at VND9.5mil and VND9.650,000/tonne respectively. Meanwhile, the lowest price level applied by other steel mills is now VND9,920,000/tonne.

As the ingot steel price has been escalating, several enterprises have raised the selling prices by VND100-200,000/tonne since the beginning of September 2007. Some enterprises are now selling at record high price levels at VND10,100,000-10,200,000/tonne.

Steel mills all said that they would raise the selling prices of finished steel further. According to Le Ngoc Son, Head of the International Cooperation Division under VIS, the ingot steel price in China once hit the yuan150/tonne level.

With the price increase movement, even if the Government cuts another 2% tax on ingot steel imports, the price of finished steel would still climb to VND11mil/tonne (delivery at mills, and not including VAT), said Mr Son.

Why are steel mills’ inspection results not made public?

VSA and its members have been trying to explain that the steel price increased sharply in the last time because of the sharp increase of ingot steel prices, but their explanation has not satisfied the public. Meanwhile, Government officials have not released the result of the inspection tours to steel mills yet.

In fact, Nguyen Tien Thoa, Head of the Price Control Department MOF had a meeting with the press, at which he gave some details about the inspections. He said that the higher input material prices in the world’s market were the main reason behind the sharp price increases of different products in the last time. The ingot steel price, for example, rose by nearly 20%. He said that many steel mills have committed to cut expenses in order to cut the production cost and prevent price increases towards years end.

According to Mr Thoa, the Vietnam-Australia Steel Company has cut its prices by VND200/kg, while Thai Nguyen steel agreed to cut VND100-200/kg.

However, in fact, the former company has decided to raise the prices by exactly VND200/kg after the price cut before. Vinakyoei has also raised the selling price by VND100-200/kg, only Thai Nguyen and Southern Corporation have not raised the selling prices yet.

It seems that steel mills make promises to cut selling prices only when Government officials come for inspections, and they raise the prices again when the inspectors are away.

Source:  VietnamNet.