Raising steel prices does more harm than good

According to the Vietnam Steel Association (VSA), by June 15, Vietnam had imported nearly 200,000 tonnes of coil steel this year, 70 percent from ASEAN countries. It had sale prices that were 500-700,000 per tonne lower than domestically-made products in some cases. 

The higher enterprises raise prices, the more they hurt themselves 

VSA has pointed out that the increasingly high prices of domestic products have created favourable conditions for China-made and ASEAN-sourced steel to flock into Vietnam. 

Countries all apply measures to encourage exports, which have made their sale prices competitive. 

Meanwhile, domestic producers have been hurrying to raise sale prices since seeing the market warm up as a result of the Government’s demand stimulus packages. The demand for construction materials, including steel, has become higher as a lot of big construction projects have been kicked off. 

In the first three months of 2009, the prices of construction steel were stable at 10.2-10.3 million dong per tonne. However, the prices have been increasing since early April, because of the ingot steel price increase of $20-30 per tonne, scrap steel price increase by $15-30 per tonne and the ingot steel import tax increase by three percent. Coil steel has been raised to 10.6-10.8 million dong per tonne, steel bar to 10.9-11.3 million dong. 

Advice: don’t raise prices further 

It seems that domestic producers always rush to raise the sale prices of finished products when the price of ingot steel just begins to increase in the world. 

It is clear that the massive imports of steel from ASEAN countries recently have put many difficulties on domestic steel producers. However, VSA has advised its member companies not to raise sale prices of steel further.  

Pham Chi Cuong, Chairman of VSA, said that government agencies need to strictly control the origin of imports. ASEAN-sourced steel products are allowed to be imported only if they have 40 percent or higher of ASEAN-made content and meet requirements in technology. 

Cuong said that VSA will ask government agencies to consider whether the massive quantity of imported steel is causing the stagnation of local production. VSA could propose limiting steel imports or higher tax rates. Vietnam has the right to use safeguard measures if local production is being threatened.