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Steel ingot producers find cash in exports as local prices drop
Local steel producers are rushing to export steel ingots, even though the domestic market can only afford 40 per cent of raw materials for manufacturing steel.
Shortages of steel ingots are causing production difficulties for many producers. Steel ingots are exported at a steep US$1,200-1,300 per tonne, but only fetch about $1,000 per tonne for construction-grade steel on the domestic market.
The more steel they produce, the more money they lose. Many steel businesses have been forced to cut production by 20 to 30 per cent and save their steel ingots for export.
This is the main reason why domestic steel prices are soaring. The price of construction-grade steel has increased to VND20 million (US$1,250) per tonne. It is likely to hit VND 21 million soon.
According to the industry insiders, exports of steel ingot by domestic steel producers are to blame for the lack of raw materials and the price hikes of construction-grade steel.
Local producers exported 7,200 tonnes of steel ingot in April and 74,000 in May.
No number was recorded in June, but it is estimated that 100,000 tonnes may have been exported.
The higher price of steel ingots overseas is fueling the exports. Businesses are making quick profits by exporting raw materials, instead of storing them for domestic production.
According to a director of a steel ingot production line, each tonne of product brings in $1,200 overseas. The waste steel used in manufacturing steel ingots go for $750 in-country. Each tonne costs $150 to produce.
He said around 30 per cent of steel ingots made by his company is for export, acknowledging that it was the best way to get quick revenues for further production.
According to the Viet Nam Steel Association (VSA), controlling exports would be key in stabilising the local steel market.
Government decisions to raise taxes on exporting steel ingot from 2 to 10 per cent to limit exports seems to be ineffective. Recently, the Viet Nam Steel Corporation asked the Government to raise taxes to 30 per cent.
Higher taxes would rein in exports of raw materials, ensuring domestic supply and make good on the Government’s promises to stabilise steel prices.
VNS
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