The country could produce around 9.8 million tonnes of steel this year, up 4% from last year’s figure, the association predicted.
According to the Ministry of Industry and Trade (MoIT), by the end of November 2011, the country’s steel production reached 6.44 million tonnes, which was down 1.5% from the previous year because production at many plants was slowed to limit inventory amid a sluggish market.
Last year, Vietnam’s two major steel importers, Japan and China, reduced their steel prices, flooding the market and lowering their inventory, which resulted in what some called unhealthy competition in Vietnam. Many producers offered prices that were between VND200,000 and VND300,000 (USD9.5-USD14.26) per tonne lower than the domestic rate.
The MoIT noted that, with the current high interest rates, steel producers have to pay about that same amount in interest for every tonne of steel kept in inventory, regardless of other costs, putting more pressure on them to offload it.
In order to maintain their businesses, steel firms, instead of lowering prices, have opted to increase commissions for their agents by VND1 million-VND1.5 million (USD47.5-USD71.3) per tonne.
Despite mounting inventory and low demand, several steel producers said that they cannot reduce prices at this time, as they still have to import materials from other countries at high rates. Price cuts in this environment may cause lasses.
Nevertheless, the demand for steel in the domestic market is expected to increase 4% this year, which would provide a much better business climate for steel producers.
According to the VSA, Vietnam produced around nine million tonnes of steel last year while, consumption hovered at only 5.6 million tonnes, down 10% from a year earlier.
