Power price hike hits steel, cement producers
Power price hike hits steel, cement producers
Given the 8.36% hike in electricity prices effective this month, many cement and steel manufacturers are under increasing financial pressure, forcing them to raise the prices of their products.
Since March 20, the retail electricity price has been revised upward by an average 8.36% to VND1,864 (eight U.S. cents) from the previous VND1,720 per kilowatt hour, excluding value-added tax, after being kept unchanged for two years.
Song Lam Cement JSC under the non-State Vissai Cement Group noted in a statement that the firm will make upward adjustments to the prices of its products by VND40,000-VND50,000 per ton from early next month due to the hike in electricity prices.
Some subsidiaries of the State-run Vietnam Cement Industry Corporation (Vicem) such as Hoang Thach, Ha Long, Ha Tien and Bim Son plan to do the same. Their prices are expected to rise by VND20,000-VND50,000 per ton.
According to Vicem, the corporation produces some 24-25 million tons of cement products annually. Under the previous electricity price, Vicem paid some VND300 billion (around US$13 million) in electricity bills per month. However, it will likely spend an additional VND20 billion (roughly US$862,000) each month following the new adjustment.
Steelmakers are also beginning to feel the pinch, forcing them to raise their product prices as well to offset the rising electricity costs.
Wholly foreign steel producer Australia SSE Steel Production Company plans to increase its prices by between VND100,000 and VND200,000 per ton for some of its products.
Similarly, Thai Nguyen Steel and Iron Corporation, under the State-owned Vietnam Steel Corporation, will soon revise its prices upward by VND150,000-VND200,000 per ton of finished products.
A director of a steel company listed on the Hanoi Stock Exchange told Thanh Nien newspaper that electricity costs account for some 8%-9% of the total steel production costs, while profits reach only 6% in this sector.
The executive added that the sector is encountering considerable difficulties in overseas markets, owing to the ongoing trade conflict between the United States and China. These problems coupled with the electricity price increase have significantly affected the operations of the company.
Vietcombank Securities Company stated in an assessment report on the effects of the electricity price hike that steel firms operating electric arc furnaces are likely to suffer heavy cost pressure, so they will have to raise their prices by at least 0.4%.
The securities firm noted that the steel output from these furnaces comprise a staggering 60% of the country’s total output.
