Steel industry to miss growth target

A worker unloads steel products at Viet Nam-Germany Steel Pipe JSC. The steel industry is forecast to face difficulties meeting 3-4 per cent growth this year. — VNA/VNS Photo Tran Viet

HCM CITY — The steel industry will find it difficult to match its targeted growth of 3-4 per cent for this year because of low consumption and large inventories, according to the Viet Nam Steel Association (VSA).

Nguyen Tien Nghi, Deputy Chairman of VSA, told Viet Nam News that the tough economic conditions, including a stagnant real estate market, was having strong impacts on the steel industry.

He said steel consumption in June was just 290,000 tonnes, down by nearly 50 per cent over "normal times."

"For the first half of 2012, consumption went down by 8 per cent, while production declined by 9 per cent over the same period last year," Nghi said.

Meanwhile, he added, unsold inventory as of the end of June was 370,000 tonnes, up by more than 10 per cent over May.

Nghi explained that real estate market, a main consumer of steel, was still in recession with fewer transactions and many delayed projects, while exports were not strong enough to help the industry overcome challenges.

"The world market is also facing tough conditions. Even China, a big steel producer and exporter, is having to deal with large inventories," Nghi said.

The latest hike in electricity prices has also affected the industry as it accounts for 6-7 per cent of steel production cost.

"We totally agree that power prices have to increase. However, this is not the time to do it," Nghi said.

The VSA said that the industry needed the Government's help to overcome the current challenges it is facing. "In the new Government resolution to help companies overcome difficulties, there is not much for the steel industry," Nghi said, adding that he hoped the Government would cut down the value-added tax on steel from 10 per cent to 5 per cent to stimulate consumption.

"This cut was done once in 2009 and it was really effective. However, the rate of 10 per cent has reimposed in 2010," he said.

A policy to help the real estate market get back on track was also needed to boost development of the steel industry, he said.

Despite the stiff challenges, Nghi said there is still a "small hope" that the steel industry meets its growth target.

"The Government has not changed its prediction regarding the national gross domestic product, so I hope steel consumption improves and gets better at the end of this year," he said. — VNS