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Steelmakers face bankruptcy
The Viet Nam Steel Association has forecast that a significant number of steel firms will shut down next year due to insufficient investment.
Firms using out-of-date technologies and with small capacities would be among those facing the chop, the association said.
Only a small number of steel producers use modern technology, nearly 30 per cent applying old mechanisms while 40 per cent manage to sit the fence.
Association vice chairman Dinh Huy Tam said that steel consumption was anticipated to surge by only 4 per cent next year, a much lower figure compared to previous years.
"It will cause steel firms a lot of potential trouble," Tam said.
He added that steel consumption in the first nine months of this year had decreased over the same period last year and that the decline was expected to continue.
Although many steel plants currently run at half capacity, most have retained large volumes of stock.
Tam said that many producers had roughly 500,000 tonnes of steel in stock, double the safety net level, which cost nearly VND150 billion (US$7.14 million) per month to store.
The association attributed the sharp decline in steel consumption to Government measures aimed at cutting public investment and rampant investment in steel production over the past few years which has caused an excess in supply over demand.
According to the Ministry of Industry and Trade, the country has 65 steel production projects in 30 provinces with capacities of more than 100,000 tonnes each. However, up to 32 projects have been licensed illegally and fall outside official development plans. According to current regulations, provincial authorities are allowed to license projects with registered capital of less than VND1.5 trillion ($71.4 million). However, they must consult relevant ministries and report to the Ministry of Planning and Investment before doing so.
According to the industry development plan, annual national steel demand will have reached roughly 15 million tonnes by 2015 and 20 million tonnes in 2020. Meanwhile, plant capacities are set to increase by up to 26 million tonnes (Indian Tata and Ba Ria-Vung Tau will have a combined capacity of 7 million tonnes).
With many firms facing the risk of closure, in the northern port city of Hai Phong alone, credit institutions have revealed that the total amount of steel production debt, including a large volume of bad debt, currently reached roughly VND4 trillion ($190.5 million).
However, association chairman Pham Chi Cuong said that trouble meant a chance for the industry to restructure and produce high quality products to better compete with imported goods.
The Government also needed to manage steel industry development planning to avoid rampant investment and an excess of supply while supporting the continued export of domestic products to the US, the EU and the Middle East in stead of to only Laos and Myanmar.
vietnamnews
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