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Steel producers bemoan suggested reserve rules
Domestic steel producers have expressed their objections to a draft regulation by the Ministry of Industry and Trade that raises the mandatory steel level firms must keep in reserve.
The draft also sets minimum stock levels for other commodities deemed essential, such as pig iron, to minimise the risk of later shortages.
Under the draft regulation, firms must keep in reserve at least 10 per cent of the steel and pig iron they imported the previous year – as opposed to 3 to 5 per cent as earlier stipulated.
The draft also states that firms must later sell the steel and pig iron they have held back at 10 per cent less than the market price declared by the Finance Ministry.
According to the ministry, the cost of pig iron accounts for 80 per cent of the price of the finished steel product. Currently, domestically produced pig iron meets just 60 per cent of local demand. The ministry said the obligatory reserve levels on pig iron and steel were necessary to stabilise prices.
However, the Viet Nam Steel Association (VSA) said the draft regulation conflicted with the market mechanism.
Pham Chi Cuong, the association's chairman, said annual national production of construction steel was nearly 9 million tonnes, while the market requirement was just 6.3 million tonnes last year. He added that over the last five years, the local market had consumed just 50 to 60 per cent of the steel produced domestically.
"Steel should not have to be kept in reserve like essential commodities such as rice, petrol and fertiliser. There is no need to keep steel in reserve as there is a surplus to requirements domestically," he said.
Typically, steel makers annually keep in reserve about 500,000 tonnes of pig iron and 300,000 tonnes of construction steel, excluding that stocked by traders. As a result, the volume of pig iron and steel in reserve is far higher than is acknowledged in the draft, according to Cuong.
He was also disapproving of the stipulation that steel and iron kept in reserve had to be sold at below the market price.
"Though the draft requires commercial banks to offer preferential interest rates and that authorities give tax breaks to importers and businesses investing in warehouse construction, it would create an uncompetitive situation," Cuong said.
The association now has 21 pig iron and 31 construction rolled-steel producing members. Cuong said they not only had to compete among themselves but with low-cost iron and steel from China and other ASEAN members.
Selling prices differed according to the name of the producer and the quality. This created a competitive climate, he added.
Officials had in the past looked into steel and pig iron prices when they had fluctuated in an effort to stop speculation, Cuong said.
In a recent letter to the MoIT, VSA said the Government did not have to introduce measures to stabilise market prices.
"Because domestic steel production has been able to meet local demand under the market mechanism, regulations are unnecessary," the letter said.
VIETNAMNEWS
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