Steel industry suffers slump

January 11, 2013 | 15:27
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Sales volume fell for the construction-steel industry last year by about 8 per cent compared to the previous year, according to the Viet Nam Steel Association (VSA).

During the year, members of VSA produced a total of more than 4.5 million tonnes, a year-on-year decline of more than 7 per cent. About 4.48 million tonnes of construction steel were sold last year.

"Last year continued to be a difficult year as everyone continued to reduce their budgets, which led to slow and stagnant production," said Pham Chi Cuong, chairman of VSA.

"The frozen real estate market also had a strong impact on the steel industry, and the construction steel industry faced many challenges last year." he stressed.

"Lower sales meant lower prices with input costs kept changing, with signs of increases. So, many steel manufacturers were forced to cut their output, and some of them went bankrupt," he said.

High inventories also plagued the steel industry last year.

By the end of December last year, construction steel inventory totalled nearly 335,000 tonnes.

"Because of weak management over many years, the output of many manufacturers was much higher than the real demand," Cuong said. "Meanwhile, sales could not recover because of the global recession, leading to high inventories."

The pressure became worse when tariffs fell on imported steel as part of World Trade Organisation commitments in the region.

To escape, many companies found export channels, but still encountered difficulties caused by trade barriers.

Last year, about two million tonnes of steel and steel ingots were exported, bringing about $1.65 billion.

VSA predicted that the challenges of the steel industry would continue this year, as "bad debts of banks and the sluggish real estate market would not be easily resolved in 2013".

Sales this month are also expected to be slower because of the upcoming Tet (Lunar New Year) holiday.


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