Steel prices remain high despite low demand

Despite a huge stockpile of steel and steel ingots during the current construction season, steel prices have remained high. 

Unsold steel piling up in a shop yard in Tan Binh District, Ho Chi Minh City (Photo: SGGP)

The price of steel is currently around VND19 million per ton, a year-on-year rise of 50 percent.
 
The price began to climb in March following the power and fuel price hike.
 
According to the Ministry of Industry and Trade, around 500,000 tons of end-product steel and 600,000 tons of steel ingots were in stock by the end of May.
 
Steel consumption has dropped by 40 percent during the last months, due to the Government curb on many construction projects and also to the high lending interest rates which discouraged people from building and repairing houses.
 
Bui Van Hoang, a steel trader in District 12, said the number of customers during the past months had reduced by 30-40 percent compared to the same period last year.
 
Some steel stores haven’t even had buyers.
 
Pham Chi Cuong, chairman of the Vietnam Steel Association (VSA), said the country has demand for only 6 million tons of construction steel per year while it has the capacity to produce up to 9 million tons.
 
He added that there will be five more larger-capacity steel factories coming into operation in future, with a total capacity of 1.5 million tons per year.
 
More steel has also been imported from China and ASEAN countries due to their low prices, Mr. Cuong said.
 
In spite of the decreasing demand for steel, companies and traders have been unable to lower their prices because they find the prices reasonable. They feel they will incur losses or go bankrupt if they lower the prices.
 
Mr. Hoang said he has bought steel from factories at VND16.7-17.5 million per ton before value added tax during the past three months. With this price, plus monthly rent, transport and labor costs, the retail price is VND19 million per ton.
 
The selling price of VND19 million per ton is just sufficient to cover costs but doesn’t generate profit, he added.
 
Meanwhile, steel makers said the market price of steel is moderate compared to production costs, therefore, they can’t lower it; otherwise, they will go bankrupt.
 
A marketing manager of the Vietnam Steel Corporation attributed the high price to increasing prices of imported steel ingots and scraps and to high production costs.
 
The VSA has petitioned the Prime Minister to exempt export duty on domestic steel products, because the country has a surplus of steel in stock while it has fierce competition with other countries, especially China, in terms of export prices.

By Lac Phong – Translated by Hoang Yen

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