The Vietnamese steel industry is continuing to suffer while the real estate market remains frozen, according to the Market Watch Team.

September steel consumption was low due to prolonged storms and the rainy season, reported the Ministry of Industry and Trade's Industry and Trade Information Centre (VITIC).

Output of construction steel in September reached 355kt, down 3% against August and 4% year-on-year.

Steel consumption decreased 5% against August and 6% compared to the same period last year.

Nguyen Tien Nghi, vice chairman of the Viet Nam Steel Association (VSA), blamed the situation on the frozen real estate market and stagnated construction projects.

In previous years, he said, steel typically fetched VND20M/t (US$952); it now sells for VND14-14.5M/t ($666-$667).

Sales are low, about 300kt/month as compared to the previous rate of 400kt, he added. Industry insiders also attributed the high inventory to low consumption of steel and the fact that domestic steel producers are facing difficulties as cheap Chinese steel floods the local market.

Many steel manufacturers have had to lower their production output by more than 50% and several are seeing losses.

Increases in the electricity price also affected local production costs and the competitiveness of domestic products.

However, VSA still predicted that consumption of domestic construction steel will increase by about 3-5% compared to 2012, with a volume of 5Mt.

They believed that the domestic property market could bounce back late this year and demand for building material may also increase. They also predicted that the retail prices of construction steel will stabilise this month after a price increase in mid-September.

Steel for domestic consumption now fetches between VND13.5 to VND14.1M/t, not including value added tax.

Source: Daily ‘Vietnam News’, Hanoi; 9 Oct 2013