Domestic Steel Makers Fall on Hard Times
4 March 2016
The application of trade protection measures has become an urgent necessity to safeguard Vietnam’s juvenile steel production industry from cheap imports from China.
Figures released by the Vietnam Steel Association (VSA) show that Vietnam imported 1.9 million tonnes of billets in 2015, more than triple 2014’s level, and equal to 30% of locally-produced volumes.
The imported volume in January 2016 alone (326,000 tonnes) doubled last year’s monthly average level/ If this trend continues, the volume of imported billets this year could be double last year’s and in 2017 the domestic billet market would be totally dominated by imported items, mainly from China, with prices lower than the domestic production cost.
According to VSA Deputy Chairman Nguyen Van Sua, as Vietnam only consumes about seven million tonnes of construction steel and 7.5 million tonnes of billets annually, the domestic market is minuscule in scope compared to the Chinese market.
Last year, China exported more than 112 million tonnes of various types of steel. OF this, 8.4 million tonnes were sold to Vietnam.
“Therefore, applying trade protective measures to billets and other imported steel products to save domestic production has become an urgent concern. If such measures are not implemented, local steel firms could go bankrupt within the next two years-without exception,” Sua added.
Aware of this looming threat, 25 steel firms belonging to assorted economic sectors have advocated the Ministry of Industry and Trade’s (MoIT) recent proposals to apply protective measures to billets and long steel.
‘For the long-term benefit of the steel industry, the VSA has committed to gradually developing a powerful steel sector-not one that merely responds to processing customer orders-but one that protects domestic production through protective measures according to international practice”, Sua said.
Some steel firms that use imported billets to feed production, however, recently sent petitions to the VSA to protest the imposition against imported billets. One of them is Pomina, one of largest steel makers in Vietnam, which also engages in billet production.
According to Pomina, Deputy Chairman Do Duy Thai, with the current import tariff of 9%, domestic billet production is in a position to compete with imported products, and as per international practice, protective measures are only applied to products, but not production raw materials.
However, another billet maker supporting the MoIT proposal to levy protective measures on imported billets, stressed that Chinese-made billets were being sold at dumping rates lower then the production cost, and as such could undermine healthy market performance.
Commenting on how Chinese steel products could be sold at a price lower than the production cost, Sua speculated that as Chinese firms had invested hugely in the steel industry, keeping factories running was their top priority to avoid machinery deterioration. Simultaneously, they might apply the tactic of selling below the production cost to reduce unsold stock and expand market share in the long-term.
Steel producers, and even billet makers, may benefit from low-cost imported billets only in the short term because a heavy reliance on imported sources could gradually eliminate the production of large-scale domestic producers, paving the way for low-cost Chinese items to flood the market, thus edging out the domestic players.
Source : vietnamnet.vn