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Steel prices, demand, construction all down   2008-08-24 - VNS

Steel prices are forecast to fall for the rest of the year as demand slackens in the domestic market, according to the Viet Nam Steel Association (VSA).

The association said July steel output was at a record low 250,000 tonnes this year, adding that August steel consumption was even lower at an estimated 200,000 tonnes.

This month, steel producers reported insignificant steel sales. Vinakyoei Steel Co, a leading steel producer from south Viet Nam, sold only 2,000 tonnes of steel in the first 10 days of August.

Decreasing demand has led to price reductions, the association reported, adding that steel prices will probably decrease in coming months, dropping from the current price of VND17.3 million per tonne, already a 30 per cent decrease on June prices.

Steel prices are lowest in the south with prices in the north roughly VND1 million per tonne higher. VSA said steel prices were also dropping in the North now.

VSA chairman Pham Chi Cuong attributed the reduction in demand and subsequent price drops to decreased construction activity during the rainy season. The global steel price was also falling and impacting local prices, said Cuong.

Despite the falling prices, experts noted that steel producers continue to make a healthy profit, as prices have skyrocketed over the last few years. Dinh Vu Steel reported a VND227 billion profit in the first six months of the year.

Meanwhile, domestic producers of steel ingot - the raw material needed for refined steel production - said they were facing difficulties, and inventory stockpiles were growing. While domestic consumption was down, the 20 per cent export duty made exports uncompetitive in the global market, curtailing export activities.

Steel ingot trades for US$950 per tonne on the domestic market, however, the market remains sluggish.

Steel ingot producers said they will cease production if the situation continues, as credit concerns would force production cuts.

To help the domestic steel ingot industry, the VSA recommended that the Government cut export tax.

Recent steel and cement price drops were seen as a positive sign by some, who believe it a signal that Goverment measures to bring down consumer price index (CPI) growth are taking effect. CPI has surged 21 per cent year-on-year in the first seven months of the year.

Deputy director of the General Statistics Office’s Trade and Pricing Statistics Division, Nguyen Duc Thang, said a price reduction in the construction materials market would make a positive impact on August’s CPI figures, as housing and construction materials account for more than 9 per cent of the basket of commodities and services that are used to calculate the CPI.

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