Viet Nam Steel Association said that the domestic steel industry will continue to face difficulties in 2011 as demand has been forecast to fall by 7% to 10% against 2010.
Mr Nguyen Tien Nghi VC of VSA said that steel makers had suffered a decline in both consumption and sale prices. In September 2011, demand was 100,000 tonnes lower than August 2011 at 381,000 tonnes and October would be only 300,000 tonnes, the lowest level of the past four months.
Mr Nghi said the low demand had caused a stockpile of 400,000 tonnes, which should normally be only 250,000 tonnes. He added that "Businesses have to pay VND 200,000 to VND 300,000 for each tonne of steel produced as interest rates sit at 18%, which has forced several factories to operate at 40% to 45% of capacity to keep their work force employed."
He added that the Government's Resolution 11 to stabilize the economy had halted public investment in construction and stalled the real estate sector, resulting in a decline in demand for steel. Increasing input costs of steel embryo, coal, petroleum and electricity have added to production prices while steel makers also have had to compete against their peers from China and other ASEAN countries after Viet Nam's admission to the WTO.
He said that "No businesses in the sector have gone bankrupt, but some have had to stop production." He added that the industry's forecast growth next year would be 4%, at least half of this year's level of 8% to 10%.
Mr Tran Tuan Duong general director of Hoa Phat Group said that the sector remained relatively small and decreased demand and a rise in costs would create a steel surplus.
He added that "We should learn from the experience of other countries, who have reduced their production capacity. Hoa Phat Group, which has been the country's second largest steel maker, has operated at 80% of capacity to avoid an abundance of steel during this period of low demand."
He said the Government should stabilize import export policies and improve efforts to prevent fraudulent trade. He added that "Steel producers should be given foreign currency support because half of the material used in steel production is imported."
Mr Nghiem Xuan Da deputy general director of Steel Corporation said that his company had been striving to maintain their market share while looking for new importers. He added that "Steel makers should save on costs, the situation would also be an opportunity for us to restructure and improve production and distribution to bypass these difficulties."
Sharing these sentiments, VSA chairman Mr Pham Chi Cuong said steel enterprises had coped with the issues of high interest rates, restricted access to bank loans, reduced exports and lower selling prices. He added that "The economic crisis could be an opportunity for the industry to restructure. Strong businesses would continue to develop while weak ones would be eliminated this is a rule."
(Sourced from www.vietnamnews.vnagency.com.vn)
