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| Ho Nghia Dung, President of the Viet Nam Steel Association |
High stockpiles, coupled with fierce competition from cheap imported steel, are hitting the domestic steel industry, an industry already under scrutiny regarding its impacts on the environment. Ho Nghia Dung, President of the Viet Nam Steel Association, speaks to bnews.vn about addressing these issues and about the ins and outs of steel production investment.
What is the situation of current supply and demand balance of the domestic steel industry?
Regarding construction steel, consumption totals are around 7 million tonnes per year, of which 5 million tonnes are produced by local plants while the rest are imported. Meanwhile, the total production capacity of construction steel in Viet Nam is actually around 12 million tonnes.
Similarly with steel ingots, production output is around 12 million tonnes, nearly doubling the domestic market demand.
The domestic steel industry is still not running at its full capacity, due to low domestic demand.
In addition, the industry faces competition from cheap steel products imported from China. Last year, steel imports totaled millions of tones in both completed products and ingots, which impacted market shares as well as the operation capacity of local producers.
However, for steel pile, galvanised steel and cold-rolled steel, domestic consumption is good and so are the export numbers. Vietnamese local producers such as Hoa Sen, Phuong Nam, Nam Kim and Dong A show strength in these products and advantages for exports in Southeast Asia region.
Given that the domestic steel industry still fails to run at its full capacity and imports offer heavy competition, do we really need to invest in steel production?
We still have to invest in steel production. People must consider which investments should be made at which stages, which time, in which scale and technologies, in order not only to control the environmental impacts but also to ensure the competitiveness of products.
In the current market, the steel association will not encourage new investments in steel ingots and pipe production because supply is exceeding demand significantly. Investments should be rather poured into improving product competitiveness, reducing wastes and easing impacts on the environment. The association encourages intensive not extensive investments.
For cold-rolled steel sheets, hot-rolled steel and alloy steel, producers can expand investments. We have advantages in those exports.
In the long term, industrialisation is still the path that Viet Nam must take, so the development of the steel industry is indispensable. The thing to consider while developing the steel industry is consumption.
Vietnamese consume around 200 kilogrammes per head per year, still low compared to the world's average level of 220-230 kilogrammes, China's 400 kilogrammes, or Europe's 600 kilogrammes.
That having been said, local steel consumption is expected to rise to 250-300 kilogrammes per year.
Hence, steel producers must base their estimates on consumption demand and other economic indicators – like gross domestic product and construction industrial index – for investment decisions.
Especially, investments should not be scattered, in both capacity and technology, in order to enhance competitiveness.
How can we balance the benefits of importing steel and using locally-produced steel?
The steel industry is faced with inventories at the moment, but the inventories are of several kinds of steel products, while many types are in a shortage.
For products that Viet Nam's steel production can meet the local demand, imports should be limited to encourage local production. Trade defense instruments should be considered.
Viet Nam needs to import steel products that the local industry still fails to produce. However, we encourage investments in producing these products.
However, protecting local production by using trade defense instruments remains a short-term measure. Enhancing competitiveness and product quality of domestic producers, these are our greater goals. — VNS