VietNamNet Bridge – A lot of steel enterprises have died actually, though none of them has declared bankruptcy.

Part 1: Lacking orders became an obsession for garment companies

According to the Vietnam Steel Association VSA, only 1.144 million tons of steel were sold in the first quarter of 2012, a decrease of 12 percent in comparison with the same period of the last year. If the steel market continues to be gloomy, the four percent growth rate goal in 2012 would be unattainable.

Real estate market gets frozen, steel mills weaken

VSA’s Chair Pham Chi Cuong said that the policy on cutting down public investment has dealt a strong blow on the steel industry. All the four main steel products, including structural steel, coated galvanized steel, tubes and cold rolled steel, have seen big unsold volumes.

As for cold rolled steel, for example, the total productivity has reached 2.7 million tons after a 1.2 million ton mill in the south became operational. Meanwhile, the total domestic demand is just one million tons, while it is very difficult to export the products because of the anti-dumping lawsuit.

Also according to Cuong, five steel mills in the north have stopped operation for the last two months and they have stopped sales as well. A lot of steel companies have died actually, though they have not declared the bankruptcy.

Meanwhile, about 60 big enterprises still have been making every effort to exist after they injected too much money in the projects.

Pomihoa, a once well-known brand of Tam Diep Company, would no longer exist on the market after 12 years of existence. Japanese Kyoei Group has become the new owner of Tam Diep after the successful stake transfer deal which helped the Japanese group hold 70 percent of stakes. Tam Diep has been renamed into Kyoei Vietnam since March 10. As such, Pomihoa brand would only exist on the unsold products.

An executive of VPS steel company has complained that since late 2011, the company has been running at the capacity lower than the designed capacity. The company now churns out 1.8 million tons or steel tubes a year, while it can sell less than one million tons on the domestic market. Meanwhile, only 1.1 million tons of coated galvanized steel is sold domestically, much lower than the output of 2 million tons.

Who to blame?

While steel mills have attributed the slow sales on the weak demand caused by the policy on tightening the public investment, experts have said that investors should blame themselves instead of passing the buck to the policy.

In fact, investors have been warned many times about the oversupply, they still have poured money into steel projects. The massive investments recently into the steel sector have led to the supply far exceeding the demand. Therefore, experts said, even if the national economy did not fall into recession, the steel industry still would suffer from their unreasonable investments.

Official reports show that there are 460 steel manufacturers nationwide. The number of steel enterprises and the production capacity have both been galloping in the last many consecutive years. The supply of structural steel has climbed to 9 million tons, while the domestic demand is no higher than 6 million tons.

However, despite the bad situation of operational steel mills, five other steel mills are to become operational in the time to come. Therefore, the thing that needs to be done to rescue the steel industry is to re-program the industry development, rather than calling for help.

Source: DDDN