News Room - Steel Industry

Posted on 29 May 2008

High steel output douses steel price fever

The price fever on the local steel market has been brought down as output in the first five months of the year increased by some 11% year-on-year to 1.6 million tonnes while demand was sluggish at a mere 1.4 million tonnes, the Vietnam Steel Association said.

Nguyen Tien Nghi, vice chair of the association, told the Daily yesterday that the supply was even more overwhelming owing to a large stockpile carried over from last year, causing prices to fall by some 300,000 dong a tonne.

The factory price in northern Vietnam now is some 15.3 million dong a tonne excluding value-added tax, while the price in the south is lower at some 14.8 million dong a tonne. During the high pitch of the fever two months ago, the price amounted to as high as 18 million dong.

As demand is stagnant, the stockpile of steel billet is mounting as manufacturers scale down production. This situation has prompted some local steel companies to export steel materials as steel on the local market is cheaper than that on the world market.

Asked if the export of steel material will endanger local production in the coming time, Nghi said the issue was not critical given the limited amount of steel billet exported so far.

"In the first five months, the country imported over 1.4 million tonnes of steel billet, while only some 7,280 tonnes of the material was exported in the first four months, which is not a significant amount," he said.

"With an average local production capacity of steel billet of some 160,000 tonnes per month, plus with the current stockpile at steel manufacturers of over 540,000 tonnes, it seems that there is no worry for steel supply in the next two months," Nghi said.

The actual figure may differ greatly, however.

Tran Thanh Hien, general director of Van Loi Iron and Steel Co in the north, said that the company has exported some 20,000 tonnes of ingots this month alone, and expected to ship 10,000 more tonnes of steel billet next month.

According to Hien, the company has some 35,000 tonnes of steel billet in stock, and the export at the moment helps the company have money to cover production costs and workers' salary. He added that the company's production capacity is some 600,000 tonnes of steel billet per year.

However, according to Nghi, the association has proposed some ministries for pricing and financial measures to help the domestic steel billet producers to overcome their present financial distress due to their large stockpiles.

The country expects to attain total steel output of over 4 million tonnes this year. Local steel billet producers are said to meet merely 50% of the total demand for the steel material.
 
The tariff for the import and the export of steel billet is some 2% at the time being.

The vice chair of VSA also expressed his concern that there has been a large amount of steel products imported from China for sale at a very low price on the local market. In the first four months of the year, Nghi said, some 283,000 tonnes of steel was imported from China and sold at some 13.5 million dong a tonne, cheaper than the price of steel produced in the country.

"In the north, many retail outlets are disposing China's steel at a very low price, and that is creating concerns about the quality of construction works because the quality of China's steel is not very good," Nghi told the Daily.