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Over-production drives down steel prices
Viet Nam's steel industry is caught in a conundrum. Supply far exceeds demand and existing capacities are not being fully utilised, but even more projects with large designed capacities have been licensed.
A Lao Dong (Labour) newspaper report yesterday cited Viet Nam Steel Association (VSA) figures that at the end of the year's first quarter, the total designed capacity of steel billet factories nationwide was 6 million tonnes, but only 3.527 million tonnes were actually produced.
Similarly, the country produced 5.6 million tonnes of rolled steel while the total designed capacity is about 9 million tonnes a year.
Pham Chi Cuong, hairman of the VSA, said the current situation could have been predicted three years ago when virtually "every household and every factory was producing steel".
In the first four months of the year, consumption of construction steel was 1.7 million tonnes, up 12.3 per cent year-on-year.
The consumption of steel in April tended to reduce due to the effect of government's policy to cut public investment, Cuong said.
The domestic steel market had adjustment and went down in both production and prices.
Viet Nam Steel Corporation affirmed it sold 169,000 tonnes last month, down 3,500 tonnes against March.
It is having 211,400 tonnes of rolled steel and 26,600 tonnes of plated steel in stock, up 36.5 per cent and 2.2 times respectively year-on-year.
In spite of the excessive capacities which could lead to fierce competition between producers, enterprises have continuously launched finished production lines into the market.
Under the 2007-25 development plan approved by the Government, the country was to produce 3.5-3.5 million tonnes of steel billets by 2010 and 12-15 million tonnes by 2025. It would also turn out 6.3-6.5 million tonnes of finished steel products by 2010 and 19-22 million tonnes by 2025.
However, by the end of last year, the total capacity of steel projects nationwide had reached 6 million tonnes of steel billets and 9 million tonnes of finished steel products, far ahead of the target.
With the projects that have already been registered for the 2015-20 period, the production capacity of steel billets will reach 16.28 million tonnes a year, while that of finished steel products will rise to 33.575 million tonnes a year by 2020, according to the VSA.
The Ministry of Industry and Trade has said about 60 per cent of the licensed steel projects so far have annual capacities of more than 100,000 tonnes.
It has petitioned the Government to amend the authorisation process for steel projects.
The Government should instruct localities to revoke licences of projects that are stalled or unduly delayed without proper reason, the ministry has proposed.
It has also asked that provincial governments stop licensing projects producing normal construction steel that does not require special technology, because supply has far exceeded demand.
There are currently three huge steel complex projects that are either at a standstill or have had their licence revoked.
The US$9.8 billion Ca Na-Ninh Thuan Steel Complex in central coastal Ninh Thuan Province has had its licence revoked because its investors, the Viet Nam Shipbuilding Industry Group (Vinashin) and Malaysia's Lion Group, have not been able to implement it.
Meanwhile, the Lao Dong report said, no action had been taken for many objective reasons in the project to build a $5 billion steel complex in central Ha Tinh Province with a designed annual capacity of 4.5 million tonnes; as well as another to build a $600 million steel plant in Ba Ria-Vung Tau Province with a capacity of 2 million tonnes of rolled steel per year.
Investors for the first project are India's Tata group and the VSC; while Essar, also of India, the VSC and the Viet Nam Rubber Corporation are investors for the second one.
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