2013 is predicted to be tougher for the Vietnamese steel industry as global demand looks likely to remain low.
According to chairman of the Vietnam Steel Association (VSA) Pham Chi Cuong, the continued paralysis of the property market has also had a significant impact on the local steel industry.
The Government’s measures to remove difficulties blocking domestic production and business performance seem to have had minimal impact on local markets. As a result, the steel industry was still suffering due to a number of challenges, said Cuong.
In addition, the local production capacity of some steel factories producing pipes, galvanised colour coated sheet and cold- rolled steel far exceeds local demand.
The domestic economy remains stagnant with decreased steel consumption leading to high inventories. At the end of 2012, the inventory volume of steel pipes stood at 16000 tonnes, according to VSA.
In 2012, domestic steel consumption was around 5Mt, down 8% from 2011. Because of the decline in local demand, steel firms sought ways to export to maintain production levels.
In addition, the tariff on imported steel has been removed under the free trade agreement that Vietnam signed with other countries, making competition between domestic and imported steel more fierce, especially against cheap construction steel from China.
Government measures to remove difficulties for investment projects focusing on financing, interest rates and cooled real estate projects need more time to take effect.
Therefore, the steel industry will continue to face hard times this year as some foreign and domestic investment projects are being carried out but at a slower pace due to the shortage of investment capital.
The Ministry of Industry and Trade and Vietnam Steel Association have acknowledged that the steel industry will continue to face difficulties and challenges this year, so they have forecast production to rise by about 2% over 2012 to reach 9.33Mt.
To achieve this, the steel industry needs to invest in raising production capacity of crude steel so as to minimize the reliance on imported steel ingot. In addition, provinces are required to tightly control licensing of new steel projects. They are also asked to review or revoke the investment certificates for projects which are not eligible for deployment.
Source: Daily ‘Vietnam News’, Hanoi; 20 Feb 2013