Steel prices are forecast to rise again early next year as the value-added tax (VAT) on steel production will be raised to 10 per cent from 5 per cent from January 1, 2009, and scrap steel, input materials for steel production, have been increasing in price.
The selling prices by domestic steel enterprises are currently staying at VND10.8 million-VND11.3 million/ton, excluding VAT, and the selling price will be VND11.3 million-VND11.8 million/ton if counting the currently-applied VAT tax rate at 5 per cent.
However, the price will be even higher as the VAT tax rate will be 10 per cent as of January 1, 2009. At that time, buyers will have to pay some VND500,000 more for every ton of steel.
Steel mills say that scrap steel prices in the world market are offered at US$275-US$300/ton, an increase of US$20-US$50/ton compared to three weeks ago. The scrap steel price hike will certainly lead ingot steel to increase in price, which then will make finished product prices increase.
The worry about the overflow of China-made cheap steel products into Vietnam has not come true yet, since the export tax rate the country imposes on steel exports remains high at 15 per cent.
Meanwhile, Vietnam has raised the import tax rate on steel to 12 per cent from 8 per cent. The production cost of China-made steel proves to be high as it bears both the high export tax in China and high import tax in Vietnam, which makes it unable to compete with Vietnam-made steel products.
Domestic steel producers have been exploiting this to raise sale prices. In early October 2008, construction steel was sold at VND9 million-VND10 million/ton, excluding VAT, while the price has been raised by VND2 million/ton.
Even with the increased prices, local steel producers say they are still incurring losses, as the steel was made of input materials imported before at high prices (ingot steel was imported at US$700/ton). However, the current domestic sale price is still VND2 million/ton higher than the world price.
Ingot steel is now being offered to Vietnamese enterprises at US$390/ton. If counting the 5 per cent import tax and transport fees, laminating expenses, selling prices of finished products should be VND9 million/ton, excluding VAT.
Local steel mills raised the selling prices right after the ingot steel price increased in the world market. However, they have not slashed selling prices since the world’s prices have gone down. The domestic price is still VND2 million/ton higher than the world price as enterprises, reasoning losses, have been insisting on keeping the high prices.
According to the Vietnam Steel Association, its member companies sold 382,000 tons in November, a three-fold increase over October 2008. Sales are estimated to drop to 300,000 tons in December. (VietNamNet, vnexpress.net)
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