The Vietnam Economic News, a newspaper of the Ministry of Industry and Trade, in a article published on February 19 proposed the steel industry reorganise its distribution system, improve competitiveness and promote exports to new markets to achieve growth of 6-7 percent in 2014.

Supply far exceeds demand

According to the Vietnam Steel Association (VSA), steel production and consumption in the 2011-2013 period faced many difficulties due to the imbalance between supply and demand.

VSA former Standing Deputy Chairman Nguyen Tien Nghi said that the construction of many steel plants led to oversupply. In addition, Vietnamese steel businesses had to compete with cheap steel imported from China, while the production capacity of many enterprises was only 40-50 percent. Steel production and consumption in 2013 decreased compared to 2012, forcing businesses to continue downsizing and cutting production.

VSA Chairman Ho Nghia Dung said that production capacity of 13 iron companies was 3.3 million tonnes, however, volume in 2013 was just over 500,000 tonnes, equal to 15-20 percent of capacity. Production capacity of 26 companies in the steel industry was 9 million tonnes, however, volume was just over 5.2 million tonnes, equal to 60 percent of capacity.

The majority of domestic steel manufacturing companies have used outdated technology, making the difficulty in competing with imported steel.

Domestic consumption

Commenting on the steel market in 2014, Vietnam Steel Corporation Deputy General Director Vu Ba On said that this will remain a difficult year and the steel industry needed to make further efforts. In addition to the oversupply, domestic steel firms have also competed with imported steel, especially cheap one from China. It is necessary to strengthen the administration, reorganise those businesses that make a loss, and improve operational efficiency.

VSA Chairman Dung said that steel consumption in 2014 would not change. Difficulties in production made the steel industry face difficulties in finding capital and partners for projects, especially unfinished and key ones. For example, the project to expand production in the second stage of the Thai Nguyen Iron and Steel Corporation was approved in 2007 with a total investment capital of 3.8 trillion VND (180 million USD) and projected to test-run in 2011, however, due to slow implementation and the market volatility, such as increasing raw material prices and fluctuant exchange rate, a total investment capital was proposed to rise to more than 8.1 trillion VND. Arrangements by now are still unresolved.

Key projects in the 2015-2025 period such as hot-rolled steel projects with a capacity of 2 million tonnes per year of the Vietnam Steel Corporation have also found no investors.

Looking for new markets

Vietnam has exported 575,991 tonnes of steel to the Cambodian market with a total value of nearly 393 million USD, an increase of 20.7 percent in volume and 10.57 percent in value, accounting for 14.6 percent of total export value. Steel is exported through An Giang waterway border gate with low costs. Steel produced in the south has effectively competed on price with Thai and Chinese steel in the Cambodian market. In addition to this, three steel production companies, namely Pomina, Tay Do Steel and Sunsteel, also export their products to Cambodia.

Vietnamese exports to Myanmar are mainly iron and steel, machinery and spare parts. In particular, iron and steel products accounte for the largest part. Therefore, in 2014, the Vietnam Steel Corporation will continue to reorganise its distribution system, improve competitiveness and boost exports to new markets, such as Cambodia, Indonesia and Myanmar.

Vietnam Steel Corporation Chairman Do Duy Thai said that developing markets in the region is the right choice by Vietnamese steel producers.-VNA