Property market woes hit Vietnam steel industry

TN News

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Steel businesses in Vietnam are struggling to survive with inventories piling up and no recovery in sight given the real-estate situation, an industry insider said.

Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association, told Tien Phong newspaper that many businesses may not have filed for bankruptcy "but are clinically dead."

Unsold stocks were 300,000 tons in 2012, 380,000 tons at their peak, 50 percent more than the normal production levels, Nghi said.

Steel consumption in February fell by more than 40 percent from the previous month, forcing many companies to reduce output to a fourth of January levels or even stop production, according to figures from the association.

Nghi said the most distressed firms are new ones that have yet to build themselves a brand name, and they cannot sell even at cut-rate prices.

Many new businesses that built facilities last year have not dared to put them into operation.

He said at the root of the problem lies real-estate market, the main steel consumer.

Property investors said earlier this month that 2012 was their worst year, with a 17.5 percent increase in excess supply to more than US$3 billion of inventory.

Public spending cuts also reduced steel consumption, he said.

The association has encouraged members to look overseas, but that would not be easy either since the Vietnamese steel industry is not as developed as that of other countries, and thus not competitive.

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Besides, Vietnamese steel producers depend mostly on bank loans obtained at interest rates many times higher than in other countries, so their costs are higher, he said.

The association earlier expressed concern about anti-dumping duties in overseas markets.

Indonesia slapped 13.5-36.6 percent taxes on Vietnamese cold-rolled steel coils last December, while Malaysia and Thailand also named Vietnam's galvanized iron and color coating iron in lawsuits for anti-dumping duties, which would result in taxes of 5-20 percent.

Nghi said Vietnamese producers should do research on what markets they can and should tap. The producers can also help themselves by changing technologies to cut costs, he said.

Some companies use coal instead of oil to fuel steel lamination, thus shaving off at least $5 from each ton of steel.

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