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Steel producers ask for higher import tax   2009-03-17 - VietNamNet/Viet Nam News

The Viet Nam Steel Association has urged the Government to raise import tax on steel by between 1-10 per cent to protect domestic production.

Experts were concerned that the proposal to raise import tax on steel, if approved, would cause a price hike in the domestic market.

The association sent a petition to the ministries of Finance, Industry and Trade, demanding a hike in import tax on steel ingot from the current 5 per cent to 15 per cent.

Import duties on finished products including rolled and barred steel were also recommended to rise from 12 per cent to 22 per cent. The increased figure for laminated steel is expected to rise by 1 per cent.

The association said something had to be done as domestic steel producers were facing bankruptcy in the wake of a wave of cheap import steel into the local market.

Chairman of the association Pham Chi Cuong said ingot steel offered by Russia and Ukraine was around US$280 per tonne, roughly $50 more including expenses ($330). The figure is $100 lower than the price at the end of February. Cuong said that with such a price, domestic ingot steel producers could not compete with imports. Scrap steel, the main material for making steel ingot, is currently around $255 per tonne.

With transport freight costing around $40-50 per tonne, the price of import steel ingot is much cheaper than domestic steel which costs roughly $430 per tonne.

Cuong said even steel producers that produce both steel ingot and finished products, such as Thai Nguyen and Hoa Phat, were also suffering from losses. Due to the flood of cheap imports, he said that several ingot steel producers were running at 30-40 per cent of designed capacity. Several mills had been forced to stop production.

Producers of finished steel goods have also suffered from the flood of imports.

Traders have estimated that at least 60,000 tonnes of rolled steel were imported by trade companies in the first two months of the year from ASEAN countries, Russia and South Korea.

Meanwhile, though steel producers have continuously slashed prices, sales have still been slow due to low demand.

According to the association's statistics, the country in the first two months of 2009 produced roughly 240,000 tonnes of steel, down 16 per cent from the same period last year. Sales in the period reached roughly 220,000 tonnes, a 26 per cent year-on-year decrease.

Meanwhile, it was reported domestic producers had a stockpile of 300,000 tonnes of steel ingot and 200,000 tonnes of finished products at the end of February.

However, experts were concerned that the proposal to raise import tax on steel, if approved, would cause a price hike in the domestic market. Experts also said that it was necessary to protect consumer interests in the context of the global downturn.

Cuong said the association knew their proposal was in contrast to the Government's policies to stimulate consumer demands, but it was important to protect domestic production in the financial crisis, adding that other countries worldwide also tended to put domestic production first. Steel producers also said the tax increase would only be temporary and would be readjusted when the price of steel ingot rose again.

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