Paradox in steel production in Vietnam

Though there has been an abundant supply of steel for construction, there is a serious shortage of steel for the supporting industry. That is reason why Vietnam has spent billions of dollar to import steel annually.

Despite Vietnam slapped new tariff, in the first eight months of the year, 12.6 million tons of steel products were imported to the country, up 27.3% on the quantity and up 2.1% on the turnover compared to the same period last year, which have allegedly threatened the local industry.

Noticeably, of 12.6 million tons of imported steel into the country, Chinese steel accounted for over 60% of the amount and recorded 56% of total turnover followed by Japanese, Korean, Taiwanese and Russian steel yet Japanese, Korean, Taiwanese and Russian steel just accounted for 38% in quantity and 39% in turnover. 

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Some imported steel items have seen an increase in consumption compared to same period last year including steel billet to 100,000 tons, up 22%; steel ingots with 97,400 tons, up 33%; corrugated iron and painting to 1.18 tons or 35% higher. However, Vietnam has made these items; accordingly, supply for steel billet, steel ingots and corrugated iron twice exceeded the demand.  

According to steel producers, despite Vietnam has levied protective tariff, imported steel especially Chinese steel is much cheaper than local products (over 10%); therefore importers have still purchased Chinese steel to sell in the local market. The Southeast Asian nation is on the development trend, construction needs increased leading to competition between local enterprises and foreign counterparts. 

For instance, Japanese Kyoei Steel Corporation has set a target of 1.2 tons of steel products for construction in Vietnam by 2020. Kyoei Steel invested US$170 for a factory in the southern province of Ba Ria- Vung Tau. In addition, the company has contributed in an international harbor project in the province which will be completed by March, 2018. 

The harbor will help Kyoei Steel import steel scrap and other commodity for the factory’s demand. Production capability of Kyoei Steel is estimated to reach 900,000 tons a year. Kyoei Steel plans to increase steel production in the factory in the northern province of Ninh Binh from 230,000 tons in 2015 to 300,000 tons a year through improving production.

Because demand of steel in Vietnam is estimated to increase by 30% in five next year up to 12 million tons by 2020, not only Japanese company but also these big companies such as Hoa Phat, Hoa Sen will also expand their production, said Dr. Tran Van Ngoc from the Industry University in Ho Chi Minh City.

As per report of the Heavy Industry Department, Vietnam can make steel for construction but it is unable to produce steel for the supporting industry, manufacturing industry and it must import around 13 million tons of steel products annually. Vietnam has spent US$7 billion to buy these special steel. 

As per a decision of the Prime Minister on December 1, 2014 with the vision to 2030, it will set up small enterprises with capability of over 3 million tons focusing on producing steel for the supporting industry. 

Hence, recently in a press brief over the steel plant project of Hoa Sen Company in the central province  of Ninh Thuan, Deputy PM Trinh Dinh Dung said that the government will re-valuate the supply and the demand in the country to restricting the investment in abundant steel kinds and encourage investment in steel production project which local enterprises have not made, yet.

SGGP

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