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Too much to handle (17/6)
17/06/2011 - 9 Lượt xem
Under the “Master Plan for the Steel Industry in the 2007-2015 period and to 2025”, Vietnam is to produce between 15 million and 18 million tons of steel to meet domestic demand and for export by 2020, of which 8 to 10 million tons is flat rolled steel and 7 to 8 million tons rolled steel.
Investment in the industry to add annual capacity of 10 million tons of steel is therefore required. In other words, according to the Vietnam Steel Association (VSA), just two steel projects with capacity of 5 million tons each would be sufficient to meet the master plan.
Investment in the industry to add annual capacity of 10 million tons of steel is therefore required. In other words, according to the Vietnam Steel Association (VSA), just two steel projects with capacity of 5 million tons each would be sufficient to meet the master plan.
But number of steel projects being licensed boomed in 2007 and 2008 and a survey conducted in 2009 by the Ministry of Industry and Trade (MoIT) revealed dozens of steel projects are in the pipeline, 24 of which were licensed locally, resulting in a total designed capacity of some 60 million tons of steel a year.
After these steel projects are put into operation the steel supply will treble demand, leading to fierce competition and possible bankruptcies. Additionally, massive investment in the steel industry has also created an imbalance in local socio-economic master plans relating to power consumption, infrastructure like seaports, roads and railways, and environmental pollution such as smoke, dust and wastewater. One steel project can also take a large area away from farming, of some 1,000 ha to 3,000 ha, not to mention the land then needed for nearby seaports and support industries.
According to MoIT, the power price in Vietnam is much lower than in other countries in the region and around the world and this encourages Vietnam’s steel makers to join hands with foreign partners to bring in inexpensive technologies that consume much electricity in order to earn as much profit as possible because power costs makes up just 5.5 per cent of the steel price, while the power consumption of a steel plant with medium-level capacity is equivalent to that of a district.
Only ten of out of the 32 VSA affiliates apply advanced production technologies, with those using outdated technologies having a major impact on the environment and raising production cost of steel products, eroding competitiveness, according to Mr Nguyen Tien Nghi, VSA Deputy Chairman.
Foreign PARTICIPATION
Under regulations from the Ministry of Finance (MoF), construction steel from China is subject to a 15 per cent import tax, while alloy steel used to produce construction steel is subject to 10 per cent, but if alloy steel is used to make metal bars then the import tax is zero. This means that Chinese steel prices are much cheaper than that of domestically-produced steel.
In the first two months of this year some 700,000 tons of six- and eight-inch diameter rolling steel were imported tax-free from China and ASEAN countries through Ho Chi Minh City customs, putting a strain on domestic steel production.
The volume of six- and eight-inch diameter rolling steel being produced locally has fallen dramatically due to the increase in imports. The market share of such products from VSA affiliates in southern provinces has fallen from 30 per cent to 14 per cent.
The total capacity of the steel industry is treble demand. Total steel output was estimated at 7.8 million tons in 2010, while demand stood at just 4.9 million tons. In 2011, with five new steel plants being put into operation and output reaching an expected 8.8 million tons, massive imports will have a negative affect on the steel industry.
VSA has therefore called for strict supervision over imported steel and has contacted MoIT, MoF and the Vietnam General Department of Customs seeking urgent solutions following a major reduction in domestically-produced rolling steel production in the first two months of the year due to cheaper imports.
Vietnam is expected to produce 6.7 million tons of steel, or 4.2 per cent more than last year, with consumption estimated to reach 11.7 billion tons this year, increasing 8 per cent over 2010, an MoIT source predicted.
Seeking a way out
In addition to cheap imports from China and ASEAN countries, the industry must also grapple with shortages of electricity difficulties in obtaining loans in dollars to pay for imported materials.
Moreover, new steel projects are expected to put into operation shortly, while demand from the construction sector remains low. There are also moves underway to cut public investment, including in infrastructure, to abide by the government’s Decree 11, which aims to curb inflation and ensure macro-economic stability.
Along with its development in the domestic market, Vietnamese steel has begun to secure a foothold in a number of foreign countries. A recent MoIT report shows that steel exports in 2010 generated revenues of over $1 billion, or around 2.5 times higher than in 2009 in both volume and value, contributing to reducing the trade deficit and balancing Vietnam’s foreign currency market. Steel makers are to accelerate exports in 2011 to avoid an excessive domestic surplus.
They target a 10 per cent increase in shipment volumes during the year, especially steel bars, steel wire rods, cold-rolled steel and zinc-coated steel. “We have been seeking government support to assist steel makers to join national export promotion programmes this year,” Mr Nghi said.
Apart from traditional markets such as Laos, Cambodia, and Myanmar, Vietnamese steel makers have also succeeded in entering major markets such as the US, Canada, and Australia. Nevertheless, compared with foreign steel giants from China, India, Japan and South Korea, Vietnamese steel makers are yet to make significant inroads.
Expand deeper into foreign markets depends on improvements to quality and prices. “We recorded encouraging steel export figures last year and will stay at the same pace to ensure local product stability and avoid a surplus in the domestic market,” said Mr Nghi.
Source: VNEconomy.
