Steel industry to grow, export pressures high

The Vietnam Steel Association has forecast that the steel industry will grow at 12 per cent this year. ( Photo vinaonesteel.com)

Several local steel producers have set lower growth targets this year after a rosy 2016 that enjoyed an improved domestic economy, higher steel prices and application of anti-dumping duties on Chinese steel. Nguyen Van Sua, Vice President of the Vietnam Steel Association (VSA), said that it was necessary for local producers to be cautious about business targets this year because supportive factors were not as good as last year.

Sua said that the association has forecast a sales growth of 12 percent this year, lower than last year’s 17 percent. Tran Dinh Long, Chairman of the Hoa Phat Group, a leading steel producer in the country, was quoted by enternews.vn as saying that the industry would continue to be fuelled by the recovery of the property market until 2018. The Hoa Sen Group has also set lower gross profit growth target at 10 percent respectively for 2017, after a 130 percent growth rate last year.

Nguyen Ngoc Anh, chairman of steel distribution firm SMC Trading Investment Joint Stock Company, which has set its 2017 after-tax profit target at nearly half of last year, said that the local steel industry was still heavily dependent on global prices. “Steel prices are on a downward trend, so local producers should be cautious,” Anh said.

According to the VSA, the price of construction steel in the local market has dropped by around 600-800 VND per kilogram in the first quarter of this year and that of iron ore is forecast to drop to around 74 USD per tonne by June from 80.9 USD at the end of March. Scrap steel is also on a downward trend at around 265-270 USD per tonne at present from 315 USD in 2016.

The association said that the drops in price were caused by the letting out of inventories as well as competition among producers to maintain their market share. Sua said that steel exports would continue to struggle in 2017 due to pressure from the investigation and application of trade defense instruments by import markets.

Many countries were enhancing application of trade defense instruments against Vietnamese steel, he said. Statistics compiled by the Vietnam Chamber of Commerce and Industry (VCCI) show that by the end of July 2016, out of 100 anti-dumping lawsuits, 20 related to the steel industry.

The Vietnam Steel Corporation has advised local producers to enhance competitiveness by improving production efficiency as well as market analysis. It has also called on the Government to issue policies to prevent mass inflow of cheap steel, especially from China, as well as trade fraud. In the first quarter of this year, steel output reached 4.6 million tonnes, up 18.8 percent over the same period last year. Sales rose 6.5 percent during this period to reach 3.76 million tones. Vietnam imported finished steel products totalling 3.56 million tonnes worth 2.2 billion USD in the first quarter, up 13 percent and 64 percent year-on-year, respectively.