Steel firms made of cement

Local leading steel maker Hoa Phat Group (HPG) just operates at 80 per cent of its capacity to reduce inventory. In the meantime it had applied diverse energy-saving and material-saving measures to lower financial costs in the face of squeezing credit and declining sales, said the group’s general director Tran Tuan Duong.

The steel sector’s on-going difficulties were inevitable on the back of curtailing public investments, dormant property market and gloomy economic outlook, said Duong.

Many big local steel firms are in the same position.

VNSteel’s deputy general director Nghiem Xuan Da said the firm churned out 1.9 million tonnes of steel products in the year ending October, 2 per cent lower than one year ago and its sales figures slid around 4 per cent. Besides, some of its member units have reported losses.

A Pomina Group representative said southern market demand at this point of time was just 75 per cent of what was a year earlier and some steel firms just work 20 days per month due to flat sales.

Pomina Group is the largest construction steel maker in the south.

Alongside huge and rising inventory is firms’ inability to source capital due to tight credit sources leading to bankruptcy fears.

“No steel firms went bankrupt until present but scores of firms are in dire straits with sluggish production. Many firms would be knocked sideways if there were no improvements in the short-term,” said Vietnam Steel Association chairman Pham Chi Cuong.

In fact, some steel billet firms are operating far below their capacity as they could not buy ores to feed production due to capital scarcity.

Exports are not easy for most firms. Though made-in-Vietnam steel has made inroads in Indonesia, the US and Canada but it is hard to stay firmly in these markets.

Vietnamese steel pipes have to compete fiercely with similar items from India and Oman in the US market, according to Vietnam-Germany Steel Pipe chairman Le Minh Hai.

A Posco Vietnam Limited representative said the firm wanted to sell its products in regional countries, however, these countries have instituted multiple barriers against imported products to shield local producers.

For instance, besides strict quality requirements Thailand, Indonesia and Malaysia impose high import duty of 5 per cent, 10 per cent and 20-25 per cent respectively on cold rolled steel.

“Vietnam should think of ways to help reduce imported items flowing into local market as currently through technical standard imposition,” said the representative.