Steel consumption in August crashes to five-year low
Source: 06-SEP-2008 Intellasia | Saigon Times Daily page 3
Sep 6, 2008 - 7:00:00 AM Monthly steel sales in August plunged to a five-year low of a mere 120,000 tonnes due mainly to a halt. of major construction projects across the country, causing great damage to both steel makers and producers of steel ingots, the Vietnam Steel Association (VSA) said.

Nguyen Tien Nghi, vice chair of VSA, said the August steel consumption was far lower than the monthly average.

"Steel consumption used to be between 180,000 and 300,000 tonnes per month before, but sales in August fell to an unprecedented level," Nghi told the Daily yesterday.

The total consumption of steel products of the country between January and July this year was some 2.1 million tonnes including some 75,000 tonnes of exported steel products, averaging out at 300,000 tonnes a month.

Nghi pointed an accusing finger to the suspension of major construction projects in the country, especially after the government ordered State-owned enterprises to put on hold construction projects deemed unnecessary or less cost-effective. He also said the rainy season was usually the low-demand period.

He said many steel producers had been groaning much for the low steel consumption because that is slowing down their production measurably.

Nghi said the steel consumption at companies as members of the association in the second haft of the year would be only some 1.6 million tonnes compared to 1.8 million tonnes in the first half, meaning total consumption this year would be about 3.4 million tonnes.

Do Duy Thai, general director of Viet Steel Company, said the company's steel output was cut down by some 30-40% last month due to very low demand from the market these days. The company has total production capacity of some 350,000 tonnes of finished steel products and some 600,000 tonnes of steel ingots a year.

The lower demand also means dampened prices for producers.

Thai told the Daily that the average factory price of steel products at his company is some 18 million dong per tonne, and the selling price at outlets is some 18.6 million dong per tonne at the moment, much lower than the peak of over 20 million dong a tonne months ago.

VSA predicted that the steel price would not go down further in the future because some main materials for steel production such as coke and iron ore are surging in prices.

The decline in steel consumption has been also affecting steel ingots producers in the country, forcing them to scale down production to avoid huge losses. Even so, they still find it difficult to offload their mounting stock.

Tran Thanh Hien, general director of Van Loi Steel Co in Hai Phong City, told the Daily that the company now has some 50,000 tonnes of steel materials in stock because it could not find buyers.

"As the export tariff on steel ingots has been raised to 20% since early last month, we've found it very hard to keep the company alive in the next few months," Hien worried.

Van Loi steel company now has some 1,000 workers, and the company must spend billions of dong per month to pay workers salary, and to service bank loans and others, he said.

To help steel material producers cope with the financial burden, VSA last week proposed the Ministry of Industry and Trade and the finance ministry to halve the export tariff on steel ingots to 10%.