VietNamNet Bridge – Though the demand and consumption level dropped dramatically in 2012, when the state cut down public investments and people fastened their belts, Vietnam still witnessed a big gap between steel imports and exports in the context of the domestic oversupply.

According to the Vietnam Steel Association (VSA), in 2012, Vietnam exported 2 million tons of steel with the total turnover of 2 billion dollars. However, it spent $7 billion to import 10 million tons of steel of different kinds, which means the trade gap of five billion dollars.

The noteworthy thing is that Vietnam not only imported scrap steel or ingot steel which are the materials for domestic steel production, but it also imported the products which are now in oversupply in Vietnam.

Experts have warned that the problem would not be settled immediately and that the trade gap would last many more years due to the increasingly high and diversified demand to serve the socio-economic development.

Meanwhile, domestic steel mills mostly make structural steel and their investments have focused only on the downstream production (importing ingot steel to make finished products), while they have not invested in upstream works (making ingot steel).

Especially, Vietnamese steel exporters have been facing higher barriers installed by the import countries.

Steel mills have been warned that they may face the anti-dumping lawsuits to be raised by the import countries. Admitting that exporting steel products is the only solution to help domestic enterprises reduce the inventories, but VSA said that the reactions by the import markets have created big challenges to Vietnam’s steel industry.

Collaborating on the impacts on the steel industry as a whole, Deputy Chair of VSA--Nguyen Tien Nghi, said Vietnamese steel products don’t have any big competitive edges, except the low prices. If import countries apply safeguard measures to restrict the imports from Vietnam, its products would be kept away from the markets.

Thailand, Indonesia and Malaysia all have threatened to apply safeguard measures against Vietnam’s steel products. A report of VSA showed that in 2012, Vietnam exported some 500,000 tons of steel to South East Asian market.

Due to the imbalance in the investment, the experts said, more and more imports would arrive in Vietnam in the time to come. The steel industry has become one of the biggest foreign currency consumers due to the big gap between imports and exports.

A paradox exists that Vietnam still has been importing the types of products it can make domestically. Domestic steel mills now have the total designed capacity much higher than the demand. However, this still cannot prevent imports from entering Vietnam.

The problem here, as experts pointed out, lies in the lower competitiveness of Vietnam’s products in comparison with the imports. Meanwhile, under the bilateral and multilateral trade agreements, Vietnam would have to step by step remove the protection over the domestic production.

Under the WTO and AFTA commitments, Vietnam would have to remove the tariffs on many product categories, including steel. If so, Vietnam would have to open the market widely for the imports with low production costs and high quality.

Pessimistic analysts say they do not think the trade deficit would decrease in the time to come. Especially, the excess of imports over exports may even higher by the time when Vietnam removes the tariffs, because of the very weak competitiveness of Vietnamese steel manufacturers.

Compiled by C. V