Local industrial machine set to run out of steam in Q2

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Ministry of Industry and Trade (MoIT) Minister Vu Huy Hoang said global commodities prices would climb as a result of rising oil prices, which would have serious impacts on the local manufacturing and production sectors.

“Difficulties have already been felt by local industries since last month and things will become harder during the next several months,” Hoang said.

MoIT statistics show that some key  industries reported lower production output and domestic sales in April against March, particularly regarding steel, air-conditioners, urea fertiliser, garments, vegetable oil and chemical products.

Steel makers produced 478,000 tonnes in April, 1.2 per cent lower than March.

According to the State-run Vnsteel,  Vietnam’s biggest steel manufacturer, the public investment down-swing under the government’s Resolution 11 dated February 24 to control inflation and stabilise the macroeconomy had hit local steel sales.

Steel makers have reported 211,400 tonnes of long-rolled steel in stock currently, up 36.5 per cent from last year’s corresponding period. Unsold flat-rolled steel reached 26,600 tonnes, 2.2 times higher than last year.

“High interest rates have also seriously affected steel production during the last month,” said Vnsteel’s deputy general director Le Phu Hung.

State-run Vinatex Group, the country’s biggest garment and textile producer and exporter,  experienced a 7.4 per cent monthly output fall to 7.5 million units in April.

“We have experienced low production because of expensive imported raw materials and increased electricity prices, and particularly high export costs,” said Vinatex’s general director Tran Quang Nghi.

The cost for a container of exported products in April has almost tripled from one year earlier, which Nghi said “has created a very great pressure on export-led manufacturing enterprises in Vietnam, including those in the garment and textile industry”.

According to the MoIT, electricity prices would possibly be raised further in June as a result of higher global oil prices.

“Local production activities will face a much harder period in the next few months due to high oil and input material prices,” Hoang said.