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With steel prices down, buyers profit VND5mil/tonne
With the current price of steel, buyers are ‘profiting’ VND5mil/tonne with a price level which has been described by steel manufacturers as ‘unimaginably low’.
Pham Chi Cuong, Chairman of the Vietnam Steel Association, said that steel manufacturers have been miserable as the sale prices cannot help offset the overly high bank lending interest rates.
Cuong said that what manufacturers are expecting now is that inflation will be reduced to a one-digit level, which would return steel consumption to normal. If not, the situation will become more serious for the producers.
Cuong admitted that the wrong forecasts about the demand for steel and ingot steel by the association have pushed manufacturers against the wall. However, he said that no one could imagine that steel consumption will be dramatically reduced in the construction season.
He said that at some moments, the ingot steel price in the domestic market was even higher than the finished steel price, which led to the re-export of ingot steel, steel that was never before seen in Vietnam. Fearing that there would not be enough ingot steel for local production, the Vietnam Steel Corporation swiftly asked to raise the export tax rate on ingot steel exports to 30-40%.
Another unanticipated problem was that the world’s economy reduced so rapidly, thus making the price of steel slide dramatically.
No ingot steel transactions are being made at this moment. Bar and rolled steel are selling at VND14mil/tonne as the ingot steel has dropped to $600/tonne. Prior to that, in July, when the ingot steel was improted at $1,100/tonne, bar steel was sold at VND17mil/tonne.
“Steel mills have become miserable as they cannot sell products, while they receive debt chasing letters every day,” Cuong said.
The problem is that a lot of construction projects, including largely state-funded ones, have been delayed in an effort to deal with inflation.
September was the fourth month which saw the sales decrease dramatically. Steel producers sold 337,000 tonnes in May, 283,000 tonnes in June, and only 115,000 tonnes in September.
Cuong has called on the state management agencies to support steel manufacturers, or ‘they will die’.
VSA has proposed three solutions to rescue steel enterprises. First, it is necessary to boost exports as the domestic demand is not big enough to consume the large stocks. In the latest news, the Ministry of Finance on October 6 reduced the export tariff levied on steel billets to 5% from the current level of 10%. However, the tax rate is still higher than the expected level by VSA at 2%.
On September 22, the steel billet export tax was halved from 20% to 10%.
Second, steel manufacturers need capital. Cuong said that he knows of some enterprises which had to borrow billions of VND on the black market to pay electricity bills.
Third, the state should speed up the construction projects and push up disbursement in order to help steel companies sell their steel.
On the question about the consumption volume by the end of the year, Cuong said he does not think the sales figure will be big. Some 2.3mil tonnes have been consumed by VSA’s members so far this year. It is expected that some 500,000 tonnes will be sold by the end of the year, and if counting on the 600,000 tonnes sold by non-VSA members, Vietnam will see the sale volume of 3.2mil tonnes this year, lower than the previous year.
VNN
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