VietNamNet Bridge – Five new steel mills with a combined capacity of 1.5 million tons per year will start operations this year, making supply further exceed demand and leading to a fiercer competition in the local steel market.

The steel mills of Thai Trung Steel Co. in Thai Nguyen, An Hung Tuong Steel Co. in Binh Duong, Middle Region Steel Co., Pacific Steel Co. and Dana-Italy Steel Co. in Danang are scheduled to begin production this year. With the additional capacity of these new plants, the total steel capacity of the country will rise to 11 million tons a year.

The annual steel consumption in Vietnam is now some five million tons, less than half of the production capacity of domestic steel mills, said Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association (VSA).

While Vietnam’s steel exports are facing stronger trade defense in foreign countries, the fact that more steel plants will be put into operation this year will make the competition among local steelmakers more intense, said Nghi.

In 2012, the domestic construction steel consumption was around five million tons, down 8% from 2011. Because of the decline in consumption at home, steel firms sought ways to export in order to maintain production.

Over two million tons of steel was exported last year, bringing in nearly US$2 billion.

However, local steelmakers still have an unsold volume of 300,000 tons. This amount is not large, but it will be hard to deal with as the purchasing power has not shown signs of recovery.

The competition in the steel pipe segment alone has been increasingly fierce, said VSA. At the end of 2012, the inventory volume of steel pipes stood at 16,000 tons.

Higher prices of power, water, fuel, coal and some other inputs push up the production cost of steel pipes.

Moreover, local steel producers last year had to cope with a relatively large amount of imported steel.

Some five million tons of steel, worth around US$5 billion, was imported in 2012. The major import items were black steel, galvanized steel sheets, stainless steel, steel pipes, welded steel, hot-rolled steel and especially construction steel from China, said Nghi.

He said VSA had repeatedly proposed relevant agencies reconsider rampant licensing of steel projects. However, the situation has not improved, as localities still grant investment certificates.

Source: SGT