Steel industry sets modest growth target of 3-4%
By Ngoc Lan and Van Nam - The Saigon Times Daily
HANOI, HCMC – The economic woes will continue to leave a huge impact on the development of the local steel industry, leading to the modest growth target of 3-4% this year of the Vietnam Steel Association (VSA).
Speaking to the Daily on Monday, VSA Chairman Pham Chi Cuong said such a growth rate was just one-sixth of that of 20% a year during the heyday from 2005 to 2009.
He ascribed this modest target to the predicted unfavorable conditions for the industry in 2012.
“The most critical issue is how local steel firms manage to maintain efficient production rather than production at all costs,” Cuong stressed.
He noted the many projects are now redundant due to the lack of control over past investments. “The most importance is to stabilize output, avoiding investment and production that cause severe imbalance,” he said.
As supply has surpassed demand, local manufacturers restrict production to avoid too much inventory and stagnant capital flow, Cuong said.
The total amount of locally produced steel in 2011 reached seven million tons, a drop of 1% against 2010. Cuong forecast the steel output would decline further given big inventory and low demand.
In addition, the overproduction forces local steel industry to bolster export. With two million tons of steel exported last year, the industry earned nearly US$2 billion, or a surge of 56.2% year-on-year.
However, local steelmakers have encountered many obstacles in the foreign markets, such as the anti-dumping lawsuit against cheap steel products from ASEAN and China.
The difficulties last year caused 5-6 enterprises to go bust and many other on the verge of bankruptcy, dragging down the total capacity of the industry by 25-30%.
Investment in steel industry will slow down
Experts predicted the impact of the market and the oversupply of construction steel and cold-rolled steel would obstruct the investment in the steel industry.
Do Duy Thai, general director of Viet Steel Co., told the Daily that both local and foreign investment would slow down in the next five years.
Sharing the same view, Vice Chairman Nguyen Tien Nghi of VSA said the country’s production capacity of construction steel had reached nine million tons, while the consumption demand was estimated at six million tons this year. Therefore, there may be no new steel project for the time being.
As for cold-rolled steel, Nghi informed there are plenty of investment projects in this kind or product with the annual capacity of 3.6 million tons, while the demand is only 1.7 million tons.
In related development, the Ministry of Industry and Trade has requested investors of the key steel projects to accelerate implementation in 2012, including Thai Nguyen, Lao Cai and Thach Khe 2 steel plants and the hot-rolled steel plant developed by India’s ESSA Group and some local firms.