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Unable to find a way out of deadlock, steel manufacturers dying
The steel industry has become more ailing than ever. The domestic market has been dominated by low cost products, while there has been no ray of hope from the export markets.
Steel manufacturers close to death, workers get redundant
According to the Vietnam Steel Association (VSA), its member companies churned out 358,000 tons of steel in August, sold 356,000 tons and still had 315,000 tons in stocks.
As such, in the first eight months of the year, the companies put out 2,984,000 tons, sold 2,945,000 tons--equal to 90.25 percent of that of the 2011’s same periods.
The figures show the biggest problem of the steel manufacturing industry: while the consumption dropped by 10 percent, the production capacity has been increasing sharply. The operational steel mills have the total production capacity of 11 million tons per annum, while the actual output is just equal to 1/3 due to the weak demand.
VSA said that the steel mills need to have the output of 420,000 tons a month at least, or 5 million tons a year in order to ensure the stable production. With such low output, a lot of steel manufacturers are dying.
VSA”s Chair Pham Chi Cuong said at least five steel enterprises have reportedly gone bankrupt so far this year, while the actual number of dead enterprises could be even higher
Cuong said even the strongest steel manufacturers, like the Hoa Phat Group, are also meeting big difficulties in steel manufacturing. They have been living on the profits from other business fields which offset the losses in the steel production.
The Vietnam Steel Corporation, one of the biggest steel manufacturers in Vietnam has laid off 3000 workers, while some of its subsidiaries have to cut down the number of production shifts since the steel mills are now running at the capacity of 30-45 percent only.
The Southern Steel Corporation, Phu My, Thai Nguyen and Nha Be steel mills have to stop operation for many days to cut down the output. The Thai Nguyen Steel Corporation could sell 14,000-15,000 tons of steel a month in recent months, which was described as “terribly low.”
Tran Van Duong, General Director of the Hoa Phat Group, said steel enterprises’ situation is really tragic, while predicting that the problems would last until 2013.
“I do not know if we can hold out to survive until the end of 2013?” Duong said, adding that structural steel, which accounts for ¾ of the total steel output, has been selling very slowly.
Steel mills have eased the sale prices twice so far this year by 300,000 dong per ton so far this year. However, despite the great efforts, the sales still have been going very slowly.
Exporting products not within Vietnamese enterprises’ reach
Structural steel products have been exported to nearby markets like Laos, Cambodia and Myanmar. However, the export volume remains modest at no more than 300,000 tons a year. Meanwhile, sheet steel, galvanized steel sheets and pipe steel are meeting with anti-dumping lawsuits.
The US and Indonesia in the past, and now Thailand and Malaysia have raised lawsuits.
As such, domestic steel products have been refused by both the domestic and foreign markets. Meanwhile, Chinese steel has been flooding the domestic market.
Chinese rolled steel has been imported on a massive scale with the import tariff of zero percent. The products has Bo element (0.008 percent), listed as alloy steel, which bears the import tariff of zero percent, in accordance with the ASEAN+1 agreement).
vietnamnet
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