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Investments in steel industry slowing down   2012-02-01 - TBKTSG

It is high possible that no investor would pour money into the steel production since the production has far exceeded the demand. Steel manufacturers have tasted the bitterness from the overinvestment in the sector.

Six steel manufacturers got bankrupted in 2011

Dau tu chung khoan has quoted Pham Chi Cuong, Chair of the Vietnam Steel Association (VSA) as saying that 5-6 steel enterprises got bankrupted in 2011, while many others were clinically dead.

The bankruptcy of the steel manufacturers has led to the reduction of 25-30 percent of the capacity.

Meanwhile, Cuong said on Thoi bao Kinh te Saigon that the steel production has suffered heavily over the last year. Therefore, steel manufacturers only hope to obtain the modest growth rate of 3-4 percent in 2012, which is much lower than that of the golden age – over 20 percent.

The most crucial problem for steel manufacturers is to maintain production in an effective way, not to produce at any costs,” Cuong said.

Cuong went on to say that the steel output has become far exceeded the demand due to the lack of control over steel investment projects. Therefore, the task that steel manufacturers need to do in 2012, like in some other economic fields, is to restructure the production.

According to the Ministry of Industry and Trade (MOIT), right in the last months of 2011, steel manufacturers have been keeping production at a moderate level, because they anticipated the low demand. It is estimated that the total steel output in 2011 was 7 million tons, a decrease of one percent in comparison with 2010.

The figure would decrease further due to the high inventory volume, while the demand has not increased again,” Cuong has warned.

In order to ease the overproduction, steel manufacturers have been trying to export steel. About two million tons of steel were exported in 2011 worth nearly two billion dollars. However, as the global economy was also gloomy, Vietnamese exporters have been facing a lot of difficulties in the export markets, including the anti-dumping lawsuits.

Investments in steel industry slowing down

Experts believe that the investment in the steel industry would slow down in the time to come, since manufacturers have witnessed how the economic difficulties have influenced other manufacturers.

“In general, investors consider the demand in the future when making investment decision. Meanwhile, the low demand has made them hesitant,” said Do Duy Thai, General Director of Viet Steel Corporation.

Thai believes that the investments in steel projects, both by domestic and foreign investors, would slow down in the next five years at least.

VSA’s Deputy Chair Nguyen Tien Nghi said that it is very likely that no one would spend money on steel production any more. The total capacity of the domestic steel mills has reached nine million tons, while the total consumption in 2012 is expected to reach six million tons only.

As for cold rolled steel, Nghi said that there are many investment projects which make this kind of products with the total capacity of up to 3.6 million tons, while the consumption is only 1.7 million tons.

Regarding the information about the anti-subsidization investigation to be taken by the US Department of Commerce against black steel pipe, galvanized steel pipe products from Vietnam, Nghi said that the US side has defined two compulsory defendants, namely SeAH Steel Vina, a 100 percent South Korean mill in Dong Nai province and Hong Nguyen Steel Company in Hai Phong City.

The Ministry of Industry and Trade has requested investors to speed up some key projects in 2012, including the Thai Nguyen upgrading project, the Lao Cai Cast Iron and Steel Mill, the Thach Khe Steel (2 million tons per annum) and the joint venture between Indian Essa and some domestic enterprises.

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