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Steelmakers to cut costs, up exports
Sustained surpluses in the steel industry demand that the sector restructure to become more responsive to market demand and to weed out weaker steelmakers, Viet Nam Steel Association vice chairman Nguyen Tien Nghi spoke to the Vietnam News Agency.
How was development of the steel industry in the first months of this year?
The stockpile in the first quarter was 288,000 tonnes, lower than the 392,000 tonnes in the same period last year. Heading into this year, however, steel producers faced multiple disadvantages, including high production costs and low demand and continued surpluses. In the first quarter, high input cost caused difficulties for local producers, with imported pig iron prices rising to US$620-650 per tonne, and the costs of steel scrap, coal, fuel and transportation all rising.
Consumption fell to 233,000 tonnes in January, and while it rose in February to 389,000 tonnes, it remained below prior monthly averages. In March, the industry sold 521,000 tonnes, with the result that overall consumption had fallen 10 per cent compared to the same period a year ago.
Steelmakers are in a fiercely competitive situation because demand continues every year below designed production capacity. State-owned enterprises hold 25 per cent of domestic market share, while joint ventures with foreign enterprises account for around 20 per cent. Domestic steelmakers must also remain price competitive with these competitors.
Things weren't expected to improve significantly in April, since the nation's economy had yet to see positive changes and public investment continued to decline. Consumption in April was projected at 450-460,000 tonnes, higher than the average rate at 420,000-430,000 tonnes. If the industry has beat this expectation, that's good news.
Policies have recently been issued aimed at reducing lending interest rates and increasing credit for some fields of the real estate industry. What impacts will these policies have on the steel industry?
The policies were intended to solve the existing difficulties of the steel industry, but the most important thing is whether they would boost market demand. To increase demand, the State needs to promote construction of necessary public works, while basic construction projects should be resumed.
Last year and this year, steel exports have increased, helping reduce the pressures of low demand on the domestic market. Weaker steel producers have also improved their production technology to increase their competitive ability.
What measures is the association proposing to restructure the steel industry?
Earlier, the association has proposed that the Ministry of Industry and Trade give incentives to steelmakers to invest in modern production technology and equipment and should adjust the plan annually for developing the steel industry.
For its long-term development, the industry should develop complexes that can go from processing iron ore to production of finished steel products, since the industry now mainly produces laminated steel products.
Another important thing to change would be the thinking that steel plants must be built in provinces with iron ore. In developed countries, the location of steel plants depends more on the transportation network that brings finished products to the market. In Viet Nam, if any province builds a steel plant because it has iron ore, the competitive capacity of the plant may be low since the country's transportation network is not advantageous.
The training of workers and engineers is another important thing. Plants should recruit retired workers who are skilled staff with experience in production.
What should the steel industry do through the end of this year to meet its targets?
The industry is sure to face many challenges in production and operations by the end of the year. The industry expects increased demand by the end of the year to enable it to meet this year's target of production growth rate of 3-4 per cent over last year. However, demand will continue to be problematic, with development of the world and local markets unpredictable. Therefore, the industry should cut production costs to increase competitive capacity and achieve a reasonable selling price, while increasing exports to reduce the pressure of low demand on the local market.
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