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Vietnam's steel sector struggles to escape rut
Publication Date : 09-10-2013
The domestic 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).
September's construction steel output reached 355,000 tonnes, down 3 per cent against August and 4 per cent year-on-year. Steel consumption decreased 5 per cent against August and 6 per cent compared to the same period last year.
Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association (VSA), blamed the situation on the frozen real estate market and stagnated construction projects.
In previous years, he said, steel typically fetched 20 million dong (US$952) per tonne; it now sells for 14-14.5 million dong ($666-$667) per tonne.
Purchasing power is low, about 300,000 tonnes per month as compared to the previous rate of 400,000 tonnes, 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 capacity by more than 50 per cent, with several 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 would increase by about 3-5 per cent compared to 2012, with a volume of five million tonnes.
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 retail prices of construction steel would stabilise this month after the price hike in mid-September.
Steel for factories now fetches between13.5 to 14.1 million dong per tonne, not including value added tax.
Cement bounces back
In the last nine months this year, cement production and consumption have surged slightly over the same period last year.
According to VITIC, in the last nine months, despite increases in coal, electricity, fuel prices and financing cost that lead to higher production costs, the cement price at factories remained stable.
In the northern market, cement prices ranged between 1.3 million dong to 1.5 million dong per tonne, while in the southern market, they ranged between 1.6 to 1.8 million dong per tonne.
The retail price for cement went up by 2,000 dong per cement package.
To make the domestic construction materials market more stable, the Vietnam Construction Material Association recently asked the government to build more national highways with concrete so as to stimulate cement sales and enhance road quality.
The association also proposed the government remove difficulties for building materials producers relating to tax incentives, debt and preferential loans.
Nguyen Huy Thang, deputy secretary general of the Vietnam Glass Association, suggested that the government offer incentives for businesses to use industrial and agricultural waste to manufacture building materials.
Besides, Thang said, banks also needed to make it easier for businesses to get loans so they could invest in improving their products.