Fiercer competition looms in steel sector next year
Fiercer competition looms in steel sector next year
Experts believe domestic steel firms will have to deal with an increasing competition triggered by cheap Chinese alloy steel imports, more steel imports from Russia, and an oversupply of many steel products on the home market.
Pressure from Russia
Thep Viet Steel Corporation’s general director Do Duy Thai said Russia’s huge amount of imported steel will flood the local market if the import tariffs imposed on Russian steel are lowered in the coming time.
Thai shared his concern with the Daily after representatives of Vietnam and the Customs Union of Belarus, Kazakhstan and Russia signed a joint statement on conclusion of negotiations over a free trade agreement (FTA) between these countries. This trade pact is expected to be signed next year.
Thai forecast that Russia’s steel imports would surge and gain a competitive edge in Vietnam as Russia is a steel giant of the world with its output ranked fifth globally (over 70 million tons annually), and strong in low production cost, abundant material supplies and advanced technology.
Ho Nghia Dung, chairman of the Vietnam Steel Association (VSA), said Russia has in the past years exported to Vietnam the steel products which Vietnam does not produce.
Vietnamese steel makers have been asked not to worry too much about Russian steel as its imports currently account for a mere 6% of total steel imports in Vietnam. However, the proportion is predicted to rise to 10-12% if the import tariffs are reduced.
Thai said with the Russian ruble diving and lower tariffs offered as a result of the FTA between Vietnam and the Customs Union, it is obvious that domestic steel firms are facing pressure from steel imports from the Russian market.
Cheap imports from China
Currently, domestic steel firms are grappling with huge construction steel imports from China. Shipments of China’s low-cost alloy steel containing Boron alone have climbed and are estimated to rise to 550,000-600,000 tons this year.
In a document sent to the ministries of industry-trade, finance, and science-technology late last month, Dung said the implementation of Circular 44 on low-priced alloy steel imports in the past five months has not brought results.
According to Dung, with China’s value-added tax refund (7-13%) for alloy steel exports, Vietnam’s imports of steel coils containing Boron will keep rising in the coming years.
Vietnam imported 10.52 million tons of steel products in January-November, a whopping increase of 21.1% against the same period last year.
Steel makers on tenterhooks
The prices of steel materials tend to decline globally, with a reduction of US$5-10 per ton in steel scrap and billets in Southeast Asia dropping by US$10-20 per ton compared to late October.
Experts said further price declines in input material and the rising imports of finished products have forced domestic steel makers to cut their selling prices and offer more discounts to compete with imports.
Steel makers in northern Vietnam have lowered their selling prices by VND200,000-350,000 per ton while the average price reduction in the south is around VND100,000 per ton.
VSA estimated Vietnam’s steel production capacity at 22 million tons annually, including 10.8 million tons of construction steel, 2.11 million tons of welded steel pipe, four million tons of galvanized roofing sheets and 4.8 million tons of cold rolled steel sheets. The current supply of each category has doubled the domestic demand, not to mention large volumes of some products like hot rolled steel and alloy steel imported into the country.
VSA forecast next year’s sales of construction steel, steel pipe, galvanized roofing sheets, cold rolled steel sheets to reach nearly 5.97 million tons (up 8%), 1.36 million tons (up 15%), 3.25 million tons (up 15%) and three million tons (up 15%) respectively. Overall steel consumption is forecast to grow by 11.8% next year.
With such increases, local steel makers will have to face a host of challenges next year if they want to operate profitably on their home market.
To support the domestic steel industry, VSA has proposed relevant agencies review steel projects to eliminate ineffective investments in order to minimize oversupply on the domestic steel.
