Tariffs Fail To Reduce Cheap Steel
23 August 2016
Despite imposing additional tariffs on imported steel billets and rods, Vietnam has failed to stem the influx of imported steel, mainly from China whose suppliers are offloading products cheaply due to oversupply in their domestic market.
Vietnam spent US$4.5 billion importing 11.1 million tonnes of iron and steel in the first seven months of this year- increases of 1.1% and 33.3% year-on-year respectively, according to data from the General Statistic Office. Some 60% of the imports came from China.
The introduction of additional tariffs has helped local steel makers improve their businesses in the first months of this year. However, the statistics show that they are still facing big pressure from a flood of Chinese imports, said Nguyen Van Sua, vice chairman of the Vietnam Steel Association.
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Vietnam imposed additional tariffs of 23.3% on imported steel billets in the first year starting from March this year, a rate which will be gradually lowered over the coming years.
Since starting this month, the rate on steel rods has been 15.4%- a figure which will decline after March 21 next year. Despite gradual reductions, the safeguards will stay in place until March 2020.
Chinese enterprises, amid the oversupply in their domestic market, have relied on overseas markets to soak up excess production in the sector. They are accepting reduced profits in order to boost exports, industry insiders said. China maintains its tax policy for steel exports as part of its efforts to help the sector tackle its longstanding overcapacity problems.
‘Overall Chinese steel prices are relatively low, the demand is steady, and together with the Renminbi’s depreciation, Chinese exports are very competitive’, Bloomberg recently quoted Helen Lau, an analyst at Hong Kong’s Argonaut Securities Asia, as saying. “It’s encouraging for Chinese mills and good for overseas consumers, but its’ not what foreign mills want to see’.
The recent safeguards implemented in Vietnam are not expected to strongly affect the local steel market in the remaining months of this year. Prices of steel products will not rise because of the oversupply in the market, said Do Duy Thai, general director of construction steel producer Thep Viet.
Echoing Thai, Sua said some speculators, who hoards steel products to wait for higher prices in March, when the Ministry of Industry and Trade applied a temporary safeguard against cheap imported steel, accelerated selling the products to recoup their capital, lowering prices since May. Prices are expected to remain stable in the coming months.
The price of construction steel presently stands at VND12-VND14 million (US$545-US$636) per tonne in the local market.
Local security company VCBS forecast that steel enterprises will se smaller profits in the second half of this year, compared to the first half, because their low-priced steel stockpiles have been sold out, and the cost of input production materials has increased.
In the steel sector, Hoa Phat and Hoa Sen groups saw the highest growth, respectively at 62% and 85.6% between January and June this year.
While China-made steel is expecte4d to continue flooding the market for the foreseeable future, local enterprises are trying to build more modern plants to better compete with China’s vast mills.
A representative of Hoa Phat, Vietnam’s biggest steel firm, said the influx of Chinese steel is the biggest pressure on the company, but it has solutions to deal with the situation. ‘With good product quality, we can compete well with foreign rivals’, he said.
Hoa Phat aims to triple its production capacity to around six million tonnes over the next five to 10 years, using modern blast furnace technology.
Vietnam’s steel consumption surged 25.5% in the first seven months of 2016, and the demand is expected to grow at more than 10% a year over the next decade as the country’s rapid economic growth fuels infrastructure development.
Steelmarkers’ share prices have risen in anticipation of future growth. The share value of VG Pipe, Nam Kim Steel, Hoa Sen, and Tien Len doubled in the first half of this year.
Source : vietnamnet.vn