The Vietnam Steel Corporation (VNSteel) has called on small-sized domestic enterprises to consider mergers as a way to become more competitive.

It has said domestic firms in general should cut costs and improve corporate management towards this end.

Tasked by the Government with taking measures to stabilise the local steel market, VNSteel has said it would enhance its study, analysis and forecasts of the market situation at home and abroad.

This would help local firms map out appropriate production strategies, it says.

It notes that during the current economic downturn, demand for steel products dropped in most markets around the world. Thus, countries have applied several measures including reducing export tariffs and offering export encouragement policies for steel to be shipped to other countries, including Vietnam .

Nguyen Tien Nghi, deputy chairman of the Vietnam Steel Association, said a monthly average of 38,000 tonnes of rolled steel entered the country in the first quarter, causing many difficulties for local producers.

“Small-scale production and out-dated technology of local steel firms have made their products less competitive than imported ones,” Nghi said.

Under WTO commitments, until 2014, the country can impose import taxes between zero and 5 percent on steel products, and would have to exempt import duties by 2015.

Analysts say the local steel industry will face even more difficulties by then.

VNSteel has suggested the Government accelerate implementation of stimulus packages for construction of social housing and infrastructure projects.

It has also petitioned the Government to encourage developers of domestic construction projects to use locally-made steel, to make the stimulus packages effective.

The association wants the Government to monitor imports more strictly to prevent the import of low-quality products at cheaper prices, which may threaten the local steel industry.

Stricter punishments should be applied to violations to create a healthy business environment, it says.

The Government should also have preferential policies on exploitation of resources and environmental taxes for key steel projects, while limiting projects that are not included in its development plan for the sector.

The association says this will help avoid a market glut and stabilise prices./.