Steel Industry Facing New Pressure

Local enterprises and agencies do not agree with action of VIS, while VIS maintains they have acted in accordance with the law.

In late March, 5,000 tonnes of steel under the VIS brand will arrive in Vietnam. It was manufactured in China but will be sold under a Vietnamese brand. Pham Chi Cuong, chairman of the Vietnam Steel Association, said VIS’s action was in opposition with the interests of Vietnamese steel manufacturing enterprises. Vietnam now has to import 50 per cent of steel ingots, mainly from China, Russia, and Ukraine. Of those countries, China accounts for 70 per cent of imported steel ingots to Vietnam, with lower prices. Worried about rapid growth of the Vietnamese steel industry, China recently changed its industry policies. Accordingly, China imposed tax rates encouraging the export of finished steel products, which are abundant in China.

 

Present prices of Chinese steel ingots sold to Vietnam are between US$500 and 520 per tonne, up by US$40 per tonne against prices in 2006. After importing ingots from China, Vietnam spends between US$30 and 50 per tonne to roll the steel. As a result, prices of finished steel products in Vietnam are around US$570-575 (VND 9.2 million) per tonne. The price is the highest it has been for many years, resulting in high cost for construction. Meanwhile, if enterprises import finished steel products from China to sell in Vietnam, prices are just at VND 8.6 million and 8.8 million per tonne.

 

Hoang Van Tong, deputy general director of the Thai Nguyen Iron and Steel Corporation, said: "In fact, the Thai Nguyen Iron and Steel Corporation has been invited by Chinese enterprises to share its brand with them, just like the case of VIS. However, we refused. For years, local steel manufacturers have just been competing against each other, instead of promoting co-operation. Therefore, in the present international integration process, the Vietnamese steel industry’s capability is not high. If other enterprises follow VIS’s path, we are uncertain about the future of the local steel industry."

 

However, Dinh Van Vi, general director of VIS, said: “We had sent letters to the General Department of Customs and the Vietnam Intellectual Property Agency and received their reply that we would not be in violation of the law. Why should not we choose to cut prices of steel products? We import steel and sell it in accordance with the law. It is a good way to lower construction costs while maintaining quality.”

Vi added that VIS employed prestigious companies in China to manufacture steel according to VIS design and Vietnamese standard TCVN 1651-1985. VIS has sent experts and engineers to China to supervise the manufacturing process. For steel imported from China, VIS will declare the origin on each Eteket and issue C/O according to Vietnamese law. In Vietnam, no steel factories have pointed out origin on the body of steel,” Vi stressed.

 

Tran Anh Son, deputy head of the Department of Competition, the Ministry of Trade, said: “I cannot imagine what will happen if enterprises of all industries in Vietnam bring their brands to foreign countries, then use materials, workers and technologies of foreign countries to manufacture products and import to Vietnam under the brand ‘Made in Vietnam.’”

 

According to experts, despite low prices, Chinese-made finished steel products have not been able to enter the Vietnamese market because of trademarks. Vietnamese consumers prefer local products to Chinese products, due to the fact that Chinese steel has yet to meet the technical standard and sample requirements. If Chinese steel products are imported and sold in Vietnam under Vietnamese brands, the local steel industry will suffer negative impacts. Local enterprises will shift from manufacturing to trading steel products. As a result, Chinese steel will dominate the Vietnamese market and an adjustment by China on prices and tax will impact the Vietnamese steel market.

 

In documents sent to the Vietnamese Steel Association, the Tran Vu Hai Law Office under the Hanoi Law Company stated that products made in China imported to Vietnam under a Vietnamese brand do not violate international practice or the law. However, if VIS is just importing products instead of outsourcing, they will have to complete tax obligations for imported goods.

 

Recently, thanks to the State’s protection, Vietnamese steel manufacturing enterprises have developed a short-term investment strategy, earning high profits from importing steel ingots and rolling them before selling in the local market. They have yet to pay attention to manufacturing steel ingots from ore, to be more active in material production.

 

Depending on import materials and production costs, local steel enterprises will face difficulties when the State reduces protection and opens the local market under the international integration process. Moreover, under new Environment Law regulations, the import of iron and steel waste, previously used as material for the local steel industry, has been constrained.

 

Cuong said two or three factories manufacturing steel from ore with a capacity of around 500,000 tonnes per year had been built. In the coming time, more enterprises will invest in technology to manufacture steel from ore. “We have invested more than US$1billion in the steel industry over the past five years. Now, many projects have been licensed. If Vietnam turns into a consumption market, all investment efforts will have been in vain, negatively impacting investment decisions of foreign investors in the Vietnamese steel industry,” Cuong said.

 

Local steel enterprises have the capacity to manufacture more than six million tonnes of steel per year, while demand is between 3.4 million and 3.5 million tonnes.

 

Factories now need four million tonnes of steel ingots, while the volume of locally made ingots is just 2.5 million tonnes, including two million tonnes of industrially made ingots and 500,000 tonnes manufactured by local craft villages.