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Lower steel prices cut into earnings

Update: June, 11/2013 - 09:46

HA NOI (VNS)— Domestic steel producers are rushing to slash prices, even cutting them lower than production costs in a desperate bid to stimulate consumption. However, the unhealthy competition has made them suffer losses.

Steel inventories have been piling up, forcing steel makers to scale down production. Last month, inventory grew from 320,000 tonnes to 350,000 tonnes, according to the Viet Nam Steel Association (VSA).

Nguyen Tien Nghi, VSA vice chairman, said the inventory growth was due to the frozen real estate market. The lack of sales forced steel companies to reduce selling prices to retain their market share, he said, but demand was nevertheless continuing to shrink as people waited for a deeper price decrease.

Last year, businesses reduced steel pipe prices by VND300,000-500,000 (US$14.30-23.80) per tonne.

According to the General Department of Customs, steel selling prices saw the highest decrease in March.

The association said input costs for steel production had not decreased while prices of other goods were on the rise, pushing up production costs.

Therefore, steel makers should not continue to lower their prices, it advised. Rather, they should reduce costs as much as they could and bring down inventories to ensure sustainable production and employment for workers.

Specialised zone

Ishisaki Yoshitomo, founder of Takako Japan and chair of Takako Viet Nam, said that Japanese corporations wanted to develop a specialised industrial zone (IZ) for the steel supporting industry in Viet Nam.

If the stamping and casting industry was developed successfully, Viet Nam would benefit from the high demand for these products throughout Southeast Asia, he said.

Yoshitomo added that Japan had significant experience in developing supporting industries, especially the stamping and casting industry, which it was eager to share in Viet Nam. Minister of Planning and Investment Bui Quang Vinh said the MPI was ready to help develop the industry in Viet Nam.

Vinh said building IZs would be simple, but attracting investment and maintaining operations would be difficult.

The Vietnamese Government always supported investors with infrastructure and legal frameworks. Building supporting industrial zones, particularly stamping and casting zones, had received special attention, he said.

For locations, he suggested Thai Nguyen, Quang Nam, Quang Ngai, Da Nang and Binh Duong provinces and HCM City due to their favourable positions, good infrastructure, deep seaports and suitable geological environment. — VNS


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