VietNamNet Bridge - Though demand is predicted to increase by 15 percent in 2015, steel manufacturers still anticipate a difficult year ahead because supply from both domestic sources and imports will increase even more sharply.

A Vietnam Steel Association (VSA) report cited by Dau Tu Chung Khoan showed that in 2014, steel mills in Vietnam ran at 60 percent of the designed capacity, lower than the average level of 76 percent in the world.

The oversupply caused by the high domestic output and sharp import increase forced steel mills to run at a moderate level.

In 2014, steel imports increased by 15 percent over 2013, while imports from China increased by twofold. Of the 4 million tons of steel imported so far, 2.3 million tons, $1.2 billion were from China.

The Rong Viet Securities Company, in its latest report, said that Vietnamese steel manufacturers would have a tough year this year.

According to VSA’s deputy chair Nguyen Van Sua, imports from China included the alloy steel which contains boron and chromium, which were not taxed. Therefore, imports have been selling more cheaply than domestic products in the market.

The imports also include types of steel and galvanized sheet metal, products which can be made domestically.

Some days ago, Tuoi Tre quoted an official from the General Department of Customs as saying that despite drastic measures applied to control of imported products, imports from China still have been increasing rapidly.

According to the South East Asia Iron & Steel Institute (SEASI), Chinese domestic demand would continue growing slowly in 2015, estimated at 0.8 percent. This means that the oversupply in China would be more serious, which would encourage Chinese manufacturers to sell steel products.

Russian steel also is a big threat to Vietnamese manufacturers. The international press has mentioned the big influences of Russia to the world’s market, not in terms of output, but in terms of prices. The Russian ruble depreciation recently has made Russian steel cheaper.

In fact, the demand for Russian steel is on the decrease over the last few years. 

However, the opening of the Vietnamese market under VCUFTA – the free trade agreement signed between Vietnam and the Russia – Belarus – Kazakhstan Customs Union, plus the ruble depreciation, both will change the current situation.

Meanwhile, according to VSA, many steel projects are expected to be put into operation in 2015.

According to Rong Viet, the input materials for making steel have been decreasing sharply in price. 

The iron ore price, for example, has dropped by 47 percent, fat coal 18 percent, and HRC 26 percent. Meanwhile, the price of finished products has decreased by 6-15 percent.

Kim Chi