Steel sector struggles to escape rut

The domestic steel industry is continuing to experience difficult times while the real estate market remains frozen, according to the Market Watch Team.

September’s steel consumption was low due to prolonged storms and the rainy season, reported the Ministry of Industry and Trade's Industry and Trade Information Centre (VITIC).

Steel consumption decreased 5% against August and 6% compared to the same period last year.

September's construction steel output reached 355,000 tonnes, down 3% against August and 4% year-on-year.

Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association (VSA), blamed the situation on the frozen real estate market and stagnated construction projects.

In previous years, he said, steel typically fetched VND20 million (US$952) per tonne; it now sells for VND14-14.5 million (US$666-667) per tonne.

The purchasing power is low, about 300,000 tonnes per month as compared to the previous rate of 400,000 tonnes, he added.

Industry insiders also attributed the high inventory to low consumption of steel and the fact that domestic steel producers are facing difficulties as cheap Chinese steel floods the local market.

Many steel manufacturers have had to lower their production capacity by more than 50%, with several seeing losses.

Increases in the electricity price also affected local production costs and the competitiveness of domestic products.

However, VSA still predicted that consumption of domestic construction steel would increase by about 3-5% compared to 2012, with a volume of five million tonnes.

They believed that the domestic property market could bounce back late this year and demand for building material may also increase.

They also predicted that retail prices of construction steel would stabilise this month after the price hike in mid-September.

Steel for factories now fetches between VND13.5 to VND14.1 million per tonne, excluding the value added tax.

Cement bounces back

Cement production and consumption surged slightly during the past nine months of this year.

According to VITIC, despite increases in coal, electricity, fuel prices and financing cost that lead to higher production costs, cement prices at factories remained stable.

Cement prices ranged between VND1.3 million to VND1.5 million per tonne in the north, and between VND1.6 million to VND1.8 million per tonne in the south.

The retail price of cement went up by VND2,000 per package.

To make the domestic construction materials market more stable, the Vietnam Construction Material Association recently asked the Government to build more national highways so as to stimulate cement sales and enhance road quality.

The association also proposed the Government remove difficulties for building materials producers relating to tax incentives, debt and preferential loans.

Nguyen Huy Thang, deputy secretary general of the Vietnam Glass Association, suggested that the Government offer incentives to businesses to use industrial and agricultural waste to manufacture building materials.

Besides, Thang said, banks also need to make it easier for businesses to get loans to improve their products.

VNS/VOV online