Chinese steel undercuts locals
13-MAY-2008 Intellasia | Vietnam Investment Reviews page 8
May 13, 2008 - 7:00:00 AM
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The domestic steel industry is being hurt by Chinese rolled steel, which is being imported at prices far below what local manufacturers can offer.
According to the Vietnam Steel Association (VSA), over the past four months, nearly 320,000 tonnes of Chinese rolled steel have been imported into Vietnam at US$32-US$38 per tonne cheaper than locally-produced steel.
"Chinese steel will continue to be imported into Vietnam in greater quantities in 2008," said Trinh Khoi Nguyen, head of Department of Investment and Development at Vietnam Steel Corporation.
"The local steel industry has been very badly impacted by cheap Chinese steel. Since early this year, the market share of locally-produced rolled steel has been reduced by 50% and may continue to fall," said Nguyen Tien Nghi, VSA vice chair.
Nghi said in 2006 and 2007, the market was also hurt by importation of Chinese steel but in smaller volumes, with some 500,000 tonnes sold at US$25-US$31 per tonne cheaper than Vietnamese steel.
Nguyen said this year, the situation would even be more difficult for local producers.
"If they want to stay in business, they will have to either reduce product prices to compete with Chinese steel or suffer further losses," he said.
However, local producers are finding it hard to reduce prices as they have to import steel billets at high prices from China, which has raised its export tax on steel billets from 15% to 25% since early this year.
At present, Chinese steel imported into Vietnam has an 8% import tax levied by Vietnam and a 15% export tax levied by China.
"Despite the taxes, its price is still cheaper than Vietnamese steel because it is produced at lower costs," Nguyen said.
Vietnam is implementing its commitments within the World Trade Organisation to gradually reduce import taxes for many foreign goods, including steel. By 2015, taxes for imported steel will be completely scrapped.
Experts said to cope with cheap Chinese steel, local producers must modernise its existing steel plants, seek other steel billet sources outside of China and cut down on production costs.
Nghi said the government had asked the Ministry of Industry and Trade, VSA and relevant agencies to build non-tariff barriers for imported steel.
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