Sourced from Vietnam News
Vietnam News reported that the domestic steel industry is cutting back on production in a big way as it faces unsold stockpiles and struggles to increase exports because it is not competitive enough. Its problems are compounded by increasing imports of cheaper steel products.
The construction season is nearing its peak, but instead of increasing capacity, steel factories nation wide are scaling back production, leading to fiercer competition.
The Pomina Steel Mill is among the companies which have been functioning at 50% of its production capacity for a few months due to low demand.
The Viet Nam Steel Corporation (VNSteel) is facing a similar situation with sales down 50% in the last few months, forcing it to decrease production and prevent excessive stockpiles. Smaller companies in the domestic market have also been experiencing dull business.
According to the Viet Nam Steel Association, while leading steel corporations and companies have been cutting their capacities by as much as 50%, smaller firms in the field have been running at 30% to 40% of their designed capacities, while some have stopped production altogether.
The association says Viet Nam produced 2.21 million tonnes of steel in the first five months of the year, a year-on-year increase of 281,000 tonnes or 14%. Total consumption was estimated at 2.14 million tonnes, up 18% against the same period last year.
The country had about 320,000 tonnes of finished steel products in stock in May and 520,000 tonnes of steel billet (or scrap iron) for production in June. During the first six months of the year, over 3 million tonnes of steel products and materials were imported into the country.
The current stock of steel, including imports, could meet domestic market demand till the end of the third quarter of this year, the director of a steel production company said on condition of anonymity.
Officials from VNSteel and Pomina Steel both said the decrease in demand was because of low consumption which, in turn, was caused largely by prolonged inflation and increased interest rates. Decree 11 on cutting public investment was another factor in the low demand for steel products.
Meanwhile, the situation of excessive production was getting worse with a number of new projects with capacities of between 250,000 to 500,000 tonnes per year set to be put into operation this year. The total capacity of the new factories is expected to exceed 2 million tonnes a year.
Many companies have been trying to export their products to deal with the situation, but are facing challenges posed by policies as well as international competition.
Mr Do Duy Thai, general director of Pomina Steel, which has been exporting its products to Cambodia and Laos, said the export value was still modest, especially at this time. He said that to be able to export to Cambodia and Laos, the products had to be priced very competitively, which was a disadvantage for the Vietnamese steel industry.
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