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Steel market reviving
Unlike the quiet atmosphere in the steel market earlier this year, the market has become more bustling in the second quarter. Steel mills have raised steel prices continuously, but experts say no price fever will occur.
Raising prices to reducing losses
According to the Vietnam Steel Association, 356,000 tonnes of steel were sold in March and 429,000 tonnes in April, the month which saw the highest sales volume so far. As such, the total steel volume sold in the first four months of the year was 1.148 million tonnes.
In April 2009, member companies of the Vietnam Steel Corporation three times raised steel prices by VND200-400,000/tonne. Meanwhile, other producers like Tisco and Vietnam-Australia in late April also raised sale prices by VND100-200,000/tonne. Steel retail prices are now hovering around VND11-11.5 million/tonne in the north, and VND10.5-11.5 million/tonne in the south.
Nguyen Tien Nghi, Deputy Chairman of VSA, said that steel producers suffered heavy losses when the world’s prices plunged. Now sale prices just can help reduce the losses.
Nghi added that before the steel price was raised to VND10.2-10.7million, steel products were sold at below production cost.
Steel producers have also attributed the sale prices of finished steel products to the price increases of ingot steel. The ingot steel price in April moved up to $420-430/tonne, while the price was just $360-370/tonne the month before. Moreover, the dollar price has increased from VND17,000 to over VND18,000/US$, which has also made import products more expensive.
On April 1, 2009, the import tax on ingot steel was raised from 5% to 8%.
Nguyen Minh Xuan, Director of HCM City Metal Company, said that enterprises have had to raise sale prices to offset the losses they incurred previously when they kept sale prices at low levels for a long time.
Reasonable price increases?
VSA has affirmed that the steel price increase is necessary and reasonable, especially as the demand for steel has increased with the construction season nearing. The association has denied the fact that producers have deliberately raised sale prices to make corrupt use of the government’s demand stimulus package.
VSA said that the 10-15% price increases are not big increases at all. Even when raising sale prices, many enterprises are still selling at below production costs. They are incurring losses of VND500-700,000/tonne for every tonne of steel.
However, the continued steel price increases recently have not been welcomed by contractors who say that they cannot make estimates for projects.
A representative of Tam Son Investment and Construction Company said that the company signed construction contracts earlier this year, when the steel price was just VND10.2-10.5 million/tonne. This means that the company will lose VND1mil for every tonne of steel, while it cannot renegotiate prices.
Meanwhile, experts have pointed out that price increases will harm domestic producers themselves, since cheap China steel, now lying at border gates, will flock into Vietnam when there are favourable conditions.
VSA said that a price fever, which occurred in 2008, when the price surged by 100%, will not occur in 2009. It thinks that steel consumption will be some 3.8 million tonnes this year, the same as last year.
VietNamNet, VNE
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