Posted on 11 Nov 2011
The domestic steel industry will continue to face difficulties this year as demand has been forecast to fall by 7 to 10 per cent against last year, the Viet Nam Steel Association has said.
Speaking at a conference to brainstorm ideas to resolve the sector's problems held in Ha Noi yesterday, the association's vice chairman Nguyen Tien Nghi said steel makers had suffered a decline in both consumption and sale prices.
Last month, demand was 100,000 tonnes lower than August at 381,000 tonnes and October would be only 300,000 tonnes - the lowest level of the past four months.
Nghi said the low demand had caused a stockpile of 400,000 tonnes, which should normally be only 250,000 tonnes.
"Businesses have to pay VND200,000 to VND300,000 (US$9.52-14.29) for each tonne of steel produced as interest rates sit at 18 per cent, which has forced several factories to operate at 40-45 per cent of capacity to keep their work force employed," he said.
He added that the Government's Resolution 11 to stabilise the economy had halted public investment in construction and stalled the real estate sector, resulting in a decline in demand for steel.
Increasing input costs of steel embryo, coal, petroleum and electricity have added to production prices while steel makers also have had to compete against their peers from China and other ASEAN countries after Viet Nam's admission to the WTO.
"No businesses in the sector have gone bankrupt, but some have had to stop production," he said, adding that the industry's forecast growth next year would be 4 per cent, at least half of this year's level of 8 to 10 per cent.
General director of Hoa Phat Group Tran Tuan Duong said the sector remained relatively small, and decreased demand and a rise in costs would create a steel surplus.
"We should learn from the experience of other countries who have reduced their production capacity. Hoa Phat Group, which has been the country's second largest steel maker, has operated at 80 per cent of capacity to avoid an abundance of steel during this period of low demand," Duong said.
He said the Government should stabilise import-export policies and improve efforts to prevent fraudulent trade.
"Steel producers should be given foreign currency support because half of the material used in steel production is imported," he added.
Deputy general director of Steel Corporation Nghiem Xuan Da said his company had been striving to maintain their market share while looking for new importers.
"Steel makers should save on costs - the situation would also be an opportunity for us to restructure and improve production and distribution to bypass these difficulties," Da added.
Sharing these sentiments, VSA chairman Pham Chi Cuong said steel enterprises had coped with the issues of high interest rates, restricted access to bank loans, reduced exports and lower selling prices.
"The economic crisis could be an opportunity for the industry to restructure. Strong businesses would continue to develop while weak ones would be eliminated - this is a rule," Cuong said.
