VietNamNet Bridge – Steel mills in Vietnam, expecting protection until they are able to compete with imports, have called for agencies to pay due attention to this matter during their negotiations over bilateral and multilateral free trade agreement (FTA).

Steel products are in stock at a steel enterprise in the southern province of Ba Ria-Vung Tau

This is what members of the Vietnam Steel Association (VSA) want, general secretary Chu Duc Khai told a seminar on opportunities in 2015 and 2016 in HCMC last week.

The idea emerged after a representative of the Central Institute for Economic Management (CIEM) pointed out opportunities and challenges for local firms when Vietnam joins the Trans-Pacific Partnership (TPP) agreement and the FTAs with the European Union and South Korea.

Local steel enterprises are grappling with a series of challenges to beef up sales on the domestic market due to low demand. Khai said currently many steel manufacturers are operating at 40-60% capacity and at the same time coping with dirt-cheap steel imports from China.

Vietnam and the Customs Union of Belarus, Kazakhstan and Russia (VCUFTA) are now in negotiations over a free trade agreement (VCUFTA) and are expected to sign this trade pact soon. In VCUFTA talks, the customs union would prioritize exports of industrial products such as steel, tires and machines to Vietnam, according to the Europe Market Department under the Ministry of Industry and Trade.

Therefore, if the local steel market is opened up to Russian steel imports, local enterprises might be put in an advantageous position as Russia is one of the world’s leading steel producing countries and its companies use modern technology to turn out steel products at competitive prices.

Khai gave an example that Russian firms need only 150 kWh to produce one ton of steel ingots while steel mills in Vietnam consume up to 450-500 kWh to make the same volume. As demand for steel in Russia has reached saturation, Russian steel products are forecast to overwhelm the local market if they are subject to lower tariffs.

Therefore, Khai said administrating agencies should draw up a protectionist roadmap of 5-10 years allowing local makers to have more time to improve their competitiveness and manufacture products at lower prices.  

Authorities should consider tariff reductions and exemptions in the next 2-3 years for the products which can compete with imports, such as hot-rolled steel sheets and alloy steel items. In addition, steel firms wanted the Government to use technical barriers to protect the local industry as other regional nations do.

While local enterprises are concerned about cheap steel imports, economic expert Pham Chi Lan warned of fierce competition from the huge steel projects invested by foreign companies in Vietnam.

Lan said local steel enterprises will have to spend more time competing with Hung Nghiep Formosa Ha Tinh Steel Company than steel imports from Russia when the Taiwanese investor commissions its steel complex in the central province.

At the seminar, speakers said not only steel companies but also enterprises in apparel and other sectors have not prepared well for the TPP and other FTAs Vietnam will join.

Tran Viet, head of the market department at Vietnam National Textile and Garment Group (Vinatex), said the trade pacts would bring more opportunities and tariff cuts to apparel firms, particularly from the United States and Japan. Currently, apparel exports to the U.S. market are entitled to tax rates of 17-18%.

However, foreign companies have been faster than Vietnamese firms in preparing to cash in on the TPP in the past two years when Vietnamese firms have not become strong and have not recovered from the impact of economic slowdown.

SGT/VNN