Excess capacity clouds the outlook for steel sector in 2015

In 2014, the steel sector obtained a growth rate of 12% thanks to active support from the Government and great effort by enterprises within the sector.

Steel output jumped 10-15% to hit an all time record high of 12 million tonnes in 2014, meeting both domestic demand and exports, according to statistics from the Ministry of Industry and Trade.

Welded steel pipes had a particularly strong year. In spite of a US anti-dumping lawsuit on welded steel pipes and welded stainless steel pressure pipes, enterprises throughout the sector report higher growth compared to previous year.

Welded steel pipe output shot up 40% on-year to hit 1.3 million tonnes, 1.1-1.2 million almost all of which had been consumed by year’s end.

The favourable results have been attributed to a well implemented State policy to reenergise consumption. The restarting of many construction projects during the year in conjunction with a VND30 trillion State stimulus package helped jump-start the demand for steel.

In particular, an inter-circular effective June 1, 2014 issued by the Ministry of Industry and Trade and the Ministry of Science and Technology redefined the standards for the quality of domestic and imported steel.  The circular was instrumental in curtailing trade fraud.

Vice Chairman of the Vietnam Steel Association Nguyen Van Sua said high growth is evidence that Vietnamese steel can be competitive in the global marketplace.

Sua cited iron sheet as a prime example of the success of the sector for 2014, for which Vietnam led the world in production at 2.7-2.8 million tonnes, far outpacing Thailand output at 2 million tonnes.

The investment that the sector made in technology and better management efficiency over the past few years returned big dividends in 2014 and most certainly would continue to pay off in 2015, Sua said.

Leading market analysts have forecasted that the steel sector will face more difficulties in 2015 as new trade pacts come into effect and price competition intensifies as tariffs are reduced.

They also anticipate anti-dumping lawsuits by enterprises around the globe will pick up as it is becoming increasingly popular to use these types of legal maneuverings as trade protection measures to avoid direct and fair competition.

VSA Chairman Pham Chi Cuong said governmental agencies at all levels should pay more attention to the steel industry by devising specific measures including adjusting the sector’s master development plan and balancing supply and demand.

They should also initiate measures, including anti-dumping lawsuits if appropriate; to prevent low quality imported products from entering the domestic market to ensure healthy competition among businesses.

VSA has forecasted the steel sector would achieve growth of 11.8% in 2015. To obtain the target, VSA has proposed relevant agencies recheck investment projects to eliminate inefficient ones to avoid a supply and demand imbalance.

It is incumbent upon the government to open door in 2015 to allow private enterprises in the steel sector to get involved in State-owned projects to increase demand and help keep pace with the increase production, Cuong concluded.