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Steel prices decrease amid construction season
The steel price has dropped by three million dong per ton from its zenith in April 2010. Still, purchasing power remains very low, even though the construction season has begun.
Since the beginning of June 2010, the Vietnam Steel Association (VSA) has twice received notices on steel price reductions from its member companies. The steel mills have cut prices by 300,000-600,000 dong per ton to 11.71-13.15 million dong per ton.
VSA noted that steel producers must ease prices because of low demand. Some producers even offer discounts of 200,000-350,000 dong per ton to clear their stockpiles.
The steel price has also declined as the ingot steel price in the world has plummeted. In Vietnam, ingot steel is $550-590 tons CFR, a decrease of $80-110 per ton. Meanwhile, scrap steel HMS 1/2 80:20 is being offered at $360-380 per ton, decreasing by $100 per ton from April 2010
Prices on other materials like iron ore, coke coal and fat coal have also declined in the world market due to low demand. Currently, steel products are selling slowly, steel mills are running at below capacity, and the supply is profuse.
According to VSA, in May 2010, the total construction steel output of its member companies reached 355,213 tons, a 13,42 percent drop from April, and a decrease of 9.44 percent from the same period of 2009. The volume of steel sold was only 283,658 tons, a fall of 5.19 percent from April and a sharp drop of 20.09 percent from the same period of 2009.
As such, in the first five months of 2010, the total output of VSA members was 1,930,343 tons, while the consumed volume was just 1,807,751 tons. Inventory volume as of May 31 reached 371,978 tons of finished products and 490,000 tons of ingot steel, enough for all steel mills in June.
Many reasons have been cited to explain theses ups and downs over the last few years. According to Thoi bao Kinh te Vietnam, the most significant cause is too many steel projects, especially multiple foreign-invested projects that have been registered and licensed recently.
According to VSA, save for some steel mills that can produce steel from scrap steel or iron ore, the majority of mills simply laminate steel from ingot steel.
In fact, many mills have low investment rates, low capacity and outdated technologies. Therefore, production costs are high and remain uncompetitive.
Steel experts have estimated that, in 2010, the total demand for steel will be about 5.5 million tons, but existing steel mills can churn out 7.8 million tons, creating a supply that will far exceed demand. Still, many investors persist in pouring money into steel mills, turning a deaf ear to overproduction warnings.
VSA observed that although all steel investors are committed to exporting their products, steel export will not be easy to accomplish.
vietnamnet, TBKTVN
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