Inox firms sceptical on Posco claim

Inox firms sceptical on Posco claim

Local firms using stainless steel have stated that complaints related to cheap steel being dumped in Vietnam were not the root cause of Posco VST and Inox Hoa Binh’s losses.

Debate has continued following the preliminary result of an anti-dumping tariff on imported cold-rolled stainless steel that was released three weeks ago by the Ministry of Industry and Trade’s Vietnam Competition Authority (VCA).

Local consumers of stainless steel criticised Posco VST, a wholly-owned affiliate of South Korean steel maker Posco Steel, claiming it suffered losses, not because of steel imports but rather because Posco VST increased its production in excess of the market capacity.

This information was found to be true in the case of nearly twenty stainless steel users in a document provided last week to Prime Minister Nguyen Tan Dung.

The document seen by VIR said “Posco VST and Inox Hoa Binh increased their production in a manner which surpassed the market . In reality this was the main reason for their loss.”

The VCA conducted a six month long investigation on imported cold-rolled stainless steel, made at the request of petitioners including Posco VST and Inox Hoa Binh. The investigation was carried out on batches of products which were imported between April 1, 2012 and March 31, 2013. Following this analysis, the VCA indicated it is due to levy an anti-dumping duty for 120 days on steel imports from mainland China, Malaysia, Indonesia, and Taiwan. The highest tariff, 30.73 per cent, would be imposed on Taiwan’s Yuan Long stainless steel corporation.

Posco VST and Inox Hoa Binh, which account for 80 per cent of domestic stainless steel production, claim that cold rolled stainless steel imports have been sold in Vietnam at 20 to 40 per cent below domestic makers’ prices. They assert this has damaged the domestic stainless steel manufacturing sector.

In contrast, the document compiled by nearly twenty companies that use cold-rolled stainless steel for their products maintained that during 2009-2012 Vietnam’s stainless steel sector increased its capacity in excess of demand. After launching its second production facility, Posco VST’s total capacity in 2012 reached 245,000 tonnes of stainless steel, surpassing Vietnam’s total demand for stainless steel.

The document stated “Posco VST borrowed a large sum for its investment and has to pay a high interest rate of $10 million per year. That is the primary reason leading to their loss.”

Posco VST also exported its products at a significantly lower price which brought about a loss. Their cold rolled stainless steel coil exports to Brazil currently incur an import tax of 35.6 per cent.

According to the Department of Tax in the southern province of Dong Nai, home to the stainless steel factory of Posco VST, the company accumulated a loss of $66.8 million from 2008 to 2012.

In the same period, Posco VST paid $2.3 million in personal income tax, value-added tax and excise to the tax department. It has not had to pay any corporate income tax because companies operating at a loss are exempt.

Therefore stainless steel users appealed to the prime minister to consider not levying anti-dumping tariffs on imported cold-rolled stainless steel from mainland China, Malaysia, Indonesia and Taiwan. They also requested he check and modify the VCA’s preliminary results.

Son Ha buys about 7,000-8,000 tonnes of Posco VST’s steel annually, which only satisfies 30 per cent of the company’s demand.

“The problem is not the competitiveness of Posco VST, but the issue is that they can’t supply the requisite diversity of stainless steel products to the local market. Also, some of Posco’s products don’t meet necessary quality standards,” said a company source.

Stainless steel users also raised concerns that if the government were to levy anti-dumping policies, it would drastically impact both companies using stainless steel and end-users. Twelve months after the investigation into stainless steel imports began, the final result of the dumping is scheduled for July 2014.

vir