In over past one month, the global market has seen a sharp reduction in steel prices due to the surplus of supply whereas the steel price of local market has continuously increased by 400,000-500,000 dong a tonne. Because of the price difference, a huge volume of foreign made steel now floods Vietnam market.

Currently, domestically manufactured steel is sold at 11.6 million dong per tonne of steel sheet, 11.3 million dong per tonne of rolled steel (VAT exclusive). Particularly, in HCM City, the steel retail prices jumped to 12.4 million dong per tonne and 12.1 million dong per tonne (for both types of steel), up over 300,000 dong per tonne compared with the month early.

Meanwhile, the world's steel billet price reduces by $40-60 to $490 per tonne from the previous month. More worthily, despite a fall in global steel prices, Vietnam's steelmakers have not had any move for a price reduction.

According to calculation of specialists, the finish price of steel in Vietnam now stands at about $600 per tonne. With the selling price of $630-640 per tone, producers can earn a profit of $30-40 per tonne or 500,000-700,000 dong per tonne. In theory, a profit of 100,000 dong per tonne is regarded to be an ideal figure for the steel manufacturing sector.

Some steelmakers explained, in 2008 many steel producers suffered big losses. So in early 2009, although earning a high profit from steel trading, factually that profit was only enough to offset a part of previous year's loss.

Vietnam Steel Association (VSA) announced that to date, 40,000-50,000 tonnes of steel (mainly rolled steel) a month are imported to Vietnam.

Price of finished steel of China, Thailand and Indonesia to Cambodia is only $440-460 per tonne equalling to 7.9-8.2 million dong per tonne depending on each kind of steel, much lower than Vietnam's. As reported, the volume of imported rolled steel accounts for 70 percent of the local market share. This is an alarming figure.

Dao Dinh Dong, head of VSA-southern headquarters' market division said that normally, steel mills in China only turn out 42-43 million tonnes a year but recently they expanded the output to 50.7 million tonnes in July and 53 million tonnes in August. China's steel price is on downward because their stockpiled steel output is high. So Chinese steel companies are boosting the export to other countries (including Vietnam) with a competitive price. Especially from this October, the companies will enjoy a higher VAT refund (from current 5 percent to 12 percent). By that time, China's steel price will be lower.

In late 2009, Vietnam's steel sector will have extra two million tonnes of steel, bringing total steel production to seven million tonnes a year while the local consumption demand is 4.2-4.6 million tonnes only. In details, Hoa Phat Steel JSC will start operation of a 350,000 tonne mill, Thang Loi Steel Co will generate the steel mill of 300,000 tonnes a year, Thep Viet with a 500,000 tonne plant, and Red River Steel JSC with a 180,000 tonne steel mill.

VSA is afraid about the steel surplus in the near future despite some steelmakers exported 50,000-70,000 tonnes a year to Cambodia, Laos and few countries.

Nguoi Lao Dong - September 28, 2009