Although the construction is in its busy beginning, the steel price has dropped by VND3 million per tonne from its peak in April 2010. However, purchasing power remains very weak.
Since the beginning of June 2010, the Vietnam Steel Association (VSA) has twice received notices on steel price reductions from its member steelmakers. The steel price has been cut by VND300,000-600,000 per tonne to VND11.71-13.15 million.
Remarking steel prices, the VSA said that steelmakers had to trim prices because of slowing demand. Some are even offering discounts of VND200,000-350,000 for every tonne sold to clear their stockpiles.
Besides, the steel price sank as the global steel ingot price was plummeting. In Vietnam, the steel ingot price is US$550-590 per tonne on CFR price, a decrease of US$80-110 per tonne. Meanwhile, scrap steel HMS 1/2 80:20 is being offered at US$360-380 per tonne, a slide of US$100 per tonne from April 2010. Disintegrated scrap steel is priced US$410 - 420 per tonne in the Southeast Asian market.
Prices on other materials like iron ore, coke coal and fat coal have also declined in the world market due to weakening demand. Currently, steel products are being sold quite slowly while steel mills are running below their capacity and the market is oversupplied.
The VSA said, in May 2010, construction steel output of its member companies totalled 355,213 tonnes, down 13.42 percent drop from April, and 9.44 percent year on year. Meanwhile, the volume of steel sold was only 283,658 tonnes, a drop of 5.19 percent from April and 20.09 percent from the same period of 2009.
In the first five months of 2010, the total output of VSA members was 1,930,343 tonnes, up 28.83 percent, while the selling volume was only 1,807,751 tonnes, up 14.69 percent. Inventories reached 371,978 tonnes of finished products as of May 31 and 490,000 tonnes of ingot steel, enough for all steelmakers in June and even in early third quarter.
Steelmakers attributed many reasons for the volatility of steel prices in the last few years. The most significant cause is the presence of so many steel projects.
Especially, many foreign-invested projects have been registered and licensed recently. According to VSA, except for some steel mills which can produce steel from scrap steel or iron ores, the majority simply laminate steel from steel ingot.
In reality, many steel plants have low investment rates, low capacity and outdated technologies. Therefore, production costs are high and remain uncompetitive.
According to experts, a steel mill requires a synchronised traffic, output market and input supply. Otherwise, costs will be very high.
Steel experts have estimated that, in 2010, the total steel demand is estimated at 5.5 million tonnes but operational steel plants can churn out 7.8 million tonnes, creating an oversupply. Nonetheless, many investors persist in pouring money into steel projects, turning a deaf ear to overproduction warnings.
The VSA said although all steel investors are committed to exporting their products, steel export will not be easy to accomplish.
Indeed, current steel investments are wasteful of money, land and other resources while the economic efficiency is very low. Hence, ineffective projects need to be put to an end to pay the way for good performers to go up. (VNE)
Vietnamese
