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Lacking dollars, ingot steel producers entreating Gov. for help
Ingot steel producers and the Vietnam Steel Association have petitioned Prime Minister Nguyen Tan Dung and Deputy Prime Minister Hoang Trung Hai, saying that they are facing the risk of having to stop production as they cannot purchase dollars to import scrap steel.
Banks turn their backs on scrap steel importers
Vu Hong Khanh, Chief Accountant of Dinh Vu Steel Joint Stock Corporation, said that he has been moving heaven and earth to arrange $4.5 million for the company to import scrap steel for domestic production.
However, banks have closed their doors on him.
The banks which Khanh contacted showed him a list of imported commodities which have priority for the purchase of foreign currencies. The list was promulgated by the State Bank of Vietnam, and does not include scrap steel.
Meanwhile, Khanh cannot get dollars on the black market, especially since the State Bank of Vietnam is tightening foreign currency transactions and imposed a heavy fine on a foreign currency exchange shop in Hanoi on July 15.
As such, though having money, Dinh Vu still cannot get foreign currencies to open letters of credit for the import of scrap steel consignments in the next month (15 percent of import consignment’s value).
Seeking foreign currencies has also been giving a headache to Nguyen Quoc Hoan, General Director of Van Loi Steel Corporation. “If Van Loi cannot import scrap steel, it will have to stop production soon,” Hoan said.
In fact, not only steel producers have had difficulties buying foreign currencies. However, previously, enterprises were able to get foreign currencies by accepting to pay ‘additional fees’ for transactions, until the State Bank of Vietnam applied strict measures to control foreign currency trade. The central bank has sent a document to commercial banks, threatening to impose heavy fines on banks that sell foreign currencies at levels higher than the ceiling levels.
“We can’t purchase dollars now even when we have money. If the situation is not improved, we will have to sit idle for two more months,” Khanh said.
Stopping production and going bankrupt?
Vietnam’s ingot steel capacity in 2009 is expected to reach 4.5 million tonnes, satisfying 60 percent of the domestic ingot steel demand. According to Pham Chi Cuong, Chairman of the Vietnam Steel Association, in the first six months of the year, Vietnam imported 980,000 tonnes of scrap steel while Vietnam needs 2 million tonnes this year.
Only Thai Nguyen Steel Corporation now can make ingot steel from ore, while other ingot steel producers have been relying on imported scrap steel, since domestic scrap steel just can meet 10-20 percent of the total demand.
Therefore, ingot steel producers do not have materials for production.
In the letter to the Prime Minister, ingot steel producers emphasised that this is a risk much greater than those caused by economic downturn and tax policies.
“This may cause the bankruptcy of a series of companies that make ingot steel from scrap steel. Dozens of thousands of billion dong injected in steel mills will not be recovered, thousands of jobs will be lost, while Vietnam’s ingot steel production will return to zero,” the petition reads.
Documents benefiting trade, harming production
Steel producers have said they have found discrepancies in legal provisions.
Under decree No 108, ingot steel production is listed as a field that enjoys investment incentives. However, producers of this field are not assisted in obtaining foreign currencies to serve production. Meanwhile, steel laminating is not encouraged, but finished steel and ingot steel are listed as items that enjoy priorities in purchasing dollars.
The Vietnam Steel Association only July 9 sent a petition to Deputy Prime Minsiter Hoang Trung Hai, State Bank of Vietnam and the Ministry of Industry and Trade, protesting the regulation. The protest was repeated in the July 14 document.
On the same day, July 14, five steel companies, Van Loi, Viet Steel, Dinh Vu, Hoa Phat and Song Da Steel, also sent a petition directly to the Prime Minister, asking the government to add scrap steel into the group of products that enjoy top priority in purchasing foreign currencies.
“The regulation set by the State Bank of Vietnam is not reasonable. Scrap steel, which is the input material of production, needs to be given higher priority than finished steel,” said Duong, General Director of Hoa Phat Steel Corporation.
Cuong of Vietnam Steel Association fears that the unreasonable regulation will pave the way for China-made and ASEAN-made steel to flood the domestic market and kill domestic products.
Pham Hung
vietnamnet
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