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Steel prices about to increase
Though the Vietnam Steel Association has committed to not raising steel prices until the end of July 2008, several of its members are planning new price increases.
In the south, several steel producers have raised steel prices by VND200-300,000/tonne. Vina Kyoei’s rolled steel is now selling at VND16.35-16.55mil/tonne, while steel bars at VND16.57mil. Pomina is selling rolled steel at VND16.42mil/tonne and steel bars at VND16.70mil/tonne.
Other still mills have not raised sale prices yet, but have expressed their concern about the sharp increases of ingot steel. Now foreign suppliers are offering ingot steel at $1,180/tonne. Moreover, the VND’s sharp decrease in value, which makes ingot steel imports more expensive, has also bolstered the difficulties for steel producers.
Nguyen Tien Nghi, Deputy Chairman of the Vietnam Steel Association, said that steel mills are losing money with the current sale prices, which were calculated based on ingot steel prices at below $1,000/tonne.
As such, the money producers get from selling finished steel is not enough for them to import ingot. If steel mills do not import any more ingot steel they will not have enough material for steel production. The inventory stocks of ingot steel will be enough for production in Q3, which means that ingot steel will be lacking in Q4.
While local steel producers have to import ingot steel at high prices, local ingot steel producers still have to export their products. The ingot steel producers said that their products are cheaper than the imports, but local steel mills are not purchasing them.
Ingot steel producers say that they are now exporting ingot steel at over $1,000/tonne, which can bring them profit.
According to the Ministry of Industry and Trade (MOIT), 100,000 tonnes of ingot steel have been exported to China, Malaysia and Thailand so far this year. Of this amount, 26,000 tonnes was re-exported while on its way to Vietnamese ports.
Sources say that enterprises have signed contracts to export over 120,000 tonnes of ingot steel.
According to the General Statistics Office, 1.778mil tonnes of ingot steel were imported in the first five months of the year, worth $1.248bil, up by 23,6% over the same period of last year. This proves to be a big volume if noting that the steel consumption is not high in the rainy season. It is estimated that 260,000 tonnes of steel will be consumed in June 2008.
MOIT may propose that the government raise the tax rate on ingot steel exports to 10% from 2% in order to limit ingot steel exports. However, the ministry has not made a decision about that as it thinks that the situation is still controllable.
The import scrap steel price has also increased. A scrap steel importer said that it is selling scrap steel to Vietnamese steel mills at $660/tonne.
VNN
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