The decision on raising the export tax rate to 10% has been explained as aiming to restrain the export of a massive quantity of ingot steel, which could lead to a lack of ingot steel for domestic steel laminating mills, and drive the prices of finished products up.

However, the goal may not be obtained as ingot steel producers have announced that they will continue exporting ingot steel despite the higher tax. It is because they cannot sell ingot steel in the domestic market.

Recently, steel mills have not purchased ingot steel due to lack of capital and the slow consumption of finished steel products. Their inventory of ingot steel products remains relatively big.

Currently, steel prices are low at VND17mil/tonne, while export ingot steel prices are as high as $1,100-1,150/tonne. With the new tax policy, enterprises would have to pay $100 for every tonne of exports, so they still could get $1,000/tonne. Export ingot steel prices would still be higher than the finished steel prices in the domestic market.

Enterprises have no other choice than exporting ingot steel, because if they don’t, they will not have money for re-investment and re-production.

Van Loi Cast Iron and Steel Company said that the company now has over 30,000 tonnes of ingot steel in stock, worth over VND400bil, while owes VND300bil. If it does not export ingot steel it will not have money to pay its debts. Every year, banks lend VND200bil at maximum to Van Loi and the company has borrowed this sum of money already.

The director of a scrap steel trade company said that with the 10% export tax, ingot steel exporters could still make profit, but the profit would be lower than previously.

The director said that ingot steel producers are making ingot steel with product they bought when the prices were low at $500-600/tonne. This spells that the total expenses to make one tonne of ingot steel are less than $900/tonne (the expenses are $140/tonne for some big enterprises, and $250/tonne at maximum for smaller workshops). Meanwhile, ingot steel is trading at $1,200/tonne in the world’s market, and Vietnamese suppliers are offering it for $1,100/tonne.

“The new tax rate proves to be not high enough to hinder enterprises from further exporting ingot steel,” he said.

Some enterprises have signed contracts on purchasing scrap steel at $700/tonne, but the consignments of scrap steel will not be put into production until the fourth quarter of the year. By that time, ingot steel could be much higher than the current $1,200/tonne level.

The Vietnam Steel Association has sent a dispatch to the Prime Minister, reporting that import ingot steel prices are even higher than finished steel prices.

While state-owned steel mills have to sell steel at fixed prices, non-state-owned mills can sell at market prices. Thai Nguyen and Southern Steel Corporations’ steel prices are VND2mil/tonne lower than the prices of joint venture steel companies. However, customers cannot enjoy the low prices. They still have to buy steel at high prices, while the profit flows into the pockets of traders and intermediaries.

VSA has proposed raising sale prices in order to help enterprises cut losses. VSA said that the biggest problem now of steel mills is lack of capital, which may force several steel mills to stop production.
Source: Vietnamnet