News Room - Steel Industry

Posted on 28 Dec 2007

Steel price climb helps speculators make major profits

Steel prices keep skyrocketing on the domestic market; many blame it on uncontrolled speculation. Steel prices set by many construction material shops in Hanoi exceed VND15mil/ton; but supply is to short to buy that much anyway.

However, Pham Chi Cuong, Chairman of the Vietnam Steel Association (VSA), said that the shortage is only with rolled steel, not bar steel. A lot of domestic rolled steel mills shut down because their products could not compete with China. China-sourced rolled steel is VND100,000/ton cheaper than Vietnamese products.

According to the VSA, rolled steel imports were strong in 2007. By December 15, Vietnam had imported 424,000 tons of rolled steel, and that figure is expected to reach 500,000 tons by years end, triple that of 2006 (150,000 tons). However, imports still cannot satisfy increasing domestic demand and domestic producers have shut down, unable to compete. It is estimated that the domestic demand for rolled steel is over 2mil tons this year.

Mr Cuong affirmed that a bar steel shortage will not occur, producers have increased capacity. VSA members churned out 300,000 tons of bar steel in November, an increase of 20,000 tons over previous months' average, and sells for VND12mil/ton at maximum.

Mr Cuong says steel prices keep increasing because of speculation. Several months ago, steel traders heard that ingot steel and steel products would become increasingly expensive compared to price increases of iron ore and coal. They were told iron ore would increase by 30%, coal by 20%, due to oil price increases, which would force the ingot steel price up to $700/ton. Fearing price increases, traders tried to buy more steel for speculation.

According to Mr Cuong, several traders purchased tens of thousands of tons when the price was low, hoping to sell when prices increased. Steel producers confirmed they received big than normal orders from steel traders.

In fact, many enterprises will make hundreds of billions of VND in 2007 thanks to speculation deals. They heard that China planned to raise the tax on finished steel products to 10% and ingot steel to 15% as of June 1, 2007. Therefore, enterprises tried to import as much steel before June 1 as they could, then sold post-tax increase for major profits.

Buyers are now hunting for products produced by State-owned Vietnam Steel Corporation. VSC has been asked by the Government to sell steel at lower prices to help stabilize the market. Sale prices of Thai Nguyen Steel and Southern Steel Corporation are at VND11.5mil/ton on average.