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Steel mills halt production
Just a few days after the Ministry of Finance (MOF) decided to slash the ingot steel export tax from 20% to 10%, the Vietnam Steel Association (VSA) proposed the ingot steel export tax be slashed further to 2% or 0%. Why?
MOF expected that its decision to slash the ingot steel export tax rate from 20% to 10% would satisfy steel mills, especially VSA’s members, as the decision was made after considering the proposal from VSA itself. However, steel mills now say they want bigger tax decreases, in order to help steel mills boost exports, thus helping them survive their current difficulties.
The noteworthy thing is that three months ago, VSA put forth a contradictory proposal: It suggested raising the export tax on ingot steel. VSA said that this is because of the unpredictable movement of the steel price in the world’s market and the unanticipated decrease of the domestic demand for steel.
In the first months of 2008, while the domestic steel price was at $830/tonne, the world’s price was as high as $1,200/tonne. The big gap between the domestic and international prices prompted domestic steel mills to export massive quantities of ingot steel. The exports of ingot steel at that time were considered a worrying problem, as they could have resulted in a domestic shortage of steel.
In order to restrain ingot steel exports, MOF, considering the proposal by VSA, announced the increase of the ingot steel export tax from 2% to 10% and then to 20%.
The global economic recession and the US financial crisis in recent days both have forced steel prices down by a half to $650-700/tonne. The world’s price decreases, together with the reduction in the demand for steel in the domestic market by 2/3, have led to bigger steel stocks. The inventory volume is now estimated at 900,000 tonnes, and has forced many steel mills to halt production temporarily.
As a result, VSA, which previously was worried about the exportation of a massive quantity of ingot steel, now considers exports the only way out for many enterprises. The exports would help them settle financial difficulties (paying bank debts and foreign partners).
VSA thinks that cutting the export tax rate to 2% or 0% is the best solution for now. It said that the high export tax rate, aiming to restrain exports, was unnecessary at this moment, and would push steel mills into bankruptcy.
VNN
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