Vietnam News Network

Steel producers are having to face difficulties caused by demand decreases, input production cost increases and the overflow of China-made products into Vietnam.

Ups and downs

According to VSA, 305,000 tonnes of steel were sold in December, a decrease of 20.5% from November and 10.4% less than in December last year.

However, the decreases still represent satisfactory sale results in comparison with previous months. Yet, VSA said that the growth may be not sustainable, as steel is still being kept in the storehouses of trade companies, and not going to construction works.

The relatively massive purchase of steel in the last two months of the year, according to VSA, could be explained by the fact that buyers wanted to avoid the VAT increase from 5% to 10%.

This means that further ups and downs may still be seen in the first months of 2009, especially as the world’s steel market has been gloomy since the end of 2008.

Many countries have been applying domestic demand stimulus measures, but the measures have not had marked effects yet. Other big steel export countries, which still have big stocks of steel, may cut down production or change export policies to sell excesses of steel to neighboring countries. This may be just the thing that China, a giant steel export country, will do in the time to come.

VSA said that since January 1, 2009 China has been applying the policy on refunding VAT for steel export items. The changes in the export policies of the nations will badly affect the production and consumption of steel of other countries, including Vietnam.

VSA has recommended that enterprises set up reasonable plans to clear big stocks in order to get back capital for re-investments.

Cautious forecasts

In the first forecast this year, VSA predicted that the total steel consumption in 2009 will be around 9mil tonnes. Of this amount, the local construction steel production will provide 4-4.5mil tonnes, while imports will provide 5-5.5mil tonnes. VSA has also predicted the export of 0.5mil tonnes this year.

In another prediction, VSA said that even if the government’s demand stimulus policy showed the designed effects, the steel industry would only grow by 2-5% in 2009 in comparison with 2008 before it could recover by the end of 2009.

According to Chairman of VSA Pham Chi Cuong, in 2009, the government plans to obtain the economic growth rate of 6.5%, and curb the inflation rate below 15%. The implementation of investment projects may slow down, therefore, the consumption of steel will not likely see big increases.

VSA has anticipated a new difficulty in 2009: the prices of key input materials like electricity, water and coal will increase, which will make steel production costs higher.