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Steel Sector - How does improve competitiveness?

As one of the industry must rely on the support and protection of the State in a long time, the steel industry are required to improve the capacity and its competitiveness in the current integration trends. And this is not easy when the internal resources of the industry still have many problems to solve.

Outdated technology, high cost

According to the Vietnam Steel Association (VSA), the total production capacity of the steel industry in the country is about 30 million tons / year. Specifically, the actual production capacity of Vietnam in goods billet is 12 million tons / year, 12 million tons of steel / year, color coated galvanized steel 5m tonnes / year, Steel Pipe 3 million tons / year. With this scale, Vietnam steel industry is assessed is the head of Southeast Asian Nations.

For example with steel, from a country that has to import billets and depends entirely on foreign sources of raw materials, since 2007, many domestic enterprises have invested from upstream billet production. If before 2010, billets Vietnam imports about 2 million tonnes / year, but now we have exported billet, which in 2012 Vietnam had exported 360 thousand tons of billets.

However, compared with the actual needs of the domestic market, demand is outstripping supply, so a new steel industry currently works only 50-60% capacity. Thus, if you talk about the number, explicit Vietnam not only meet the domestic demand that is overcapacity, especially construction steel items.

However, issues raised steel prices in Vietnam are higher than Chinese steel imports a kind and like it or not, this also reflects the production capacity and competitiveness of the steel industry in the integration play . Large supply, and must compete with cheap foreign steel imports lead to competition between firms producing steel on the domestic market is quite fierce, not to mention competitive with foreign steel while Vietnam Steel Products exports to the country.

To protect domestic producers, Vietnam has adopted safeguard measures against imports of steel billet and from September 3-2016 but actually through December 5, steel imports keeps rising. Therefore, addressing the root causes of the inadequacies of Vietnam steel market must come from improving the competitiveness of the steel industry from the intrinsic strength of the enterprise. Currently, the scale, technological level of many enterprises is limited leading to price, product quality is not really competitive.

Company representatives Phu My Flat Steel said, the production scale of enterprises is relatively small, production costs remain high, the price is not competitive. These devices operate over the years has shown signs of deterioration, the utilization rate is not satisfactory, inadequate technology than domestic rivals.

In fact, the technological level of the Vietnam Steel is now rated as weak. Limited financial capacity leads to more business investment is only a small scale production line, old electric furnace technology, fuel consumption and high costs lead to products that are not competitive.

Commenting on the competitiveness of the steel industry in the country, representing an FDI enterprises said, given the competitiveness of the enterprise technically Vietnam very well, but in terms of price is not right. Currently buyers are comparing prices of steel in Vietnam with Chinese steel, while steel prices higher Vietnam. Related to the competitiveness of steel enterprises in domestic treatment, this represents FDI enterprises also said that Vietnam now is overcapacity, should therefore not be licensed investment projects in steel in Vietnam South by market uncertainty will be chaos, development planning steel industry will be broken. On the enterprise side, the need to reduce costs, manufacturing efficiency, eliminate waste in the production process.

The pressure to reform

Last time, after the imposition of safeguard actions with imported steel, billet and construction steel prices rising domestic opinion that questioned the production capacity of the steel industry. Billet price increases caused by rising world prices, but at Vietnam market, billet prices rose "double" by rising world prices and by safeguard duties. So far, after the entry of Steel Association and billet production enterprises, long steel, steel prices in the market has stabilized.

According to Nguyen Van Toan, Deputy General Director of Vietnam Steel Corporation (VNSTEEL), after the decision to impose safeguard duty, VNSTEEL has directed the unit to increase production, especially billet to provide for production units in the sector, replacing imports, try not to occur shortages as well as raw materials for production product on the market, leading to speculation damaging to consumers, causing urgent public opinion. The business has performed relatively well its role in supplying products, curb price hikes in the market. Despite speculation of a number of commercial units but not last time with mild volatility. The market had a correction as soon as the factory to ensure sufficient supply.

Conversation with Customs, representing an enterprise manufacturing these items are concerned, the imposition of a restriction to enjoy the advantages of integration, on the other hand will limit mobility, limited awareness raising competitive capacity of steel production enterprises. According to this position, the Steel Association forecast steel production in 2016 will increase by about 15% long, 10% of steel billet. Accordingly, the number of embryos needed to produce about 8.5 million tonnes and embryo could meet the domestic production from about 6.5 million tonnes. Looking at the existing capacity of ingot factory in the country, the best capability also meets only 6.5 million tonnes. Such a shortfall of about 2 million tons. Most businesses have an embryo production facilities to meet their demand for steel, the country now only has two factories specialized in producing embryos with negligible power.

In fact, in recent years, the domestic steel industry had to struggle to deal with a large volume of cheap Chinese steel imports into Vietnam massively. Ignoring these factors and trade fraud, or other measures to promote and support the export of China for steel, according to experts, said a fair, cost of Chinese steel production is competitive and in the long run, the pressure of imported steel remains strong.

Thus, the storm of cheap steel imports of China caused a major influence on Vietnam's steel industry is the fact alarm bells to the steel industry must now actually put up the balance of the factors related to post production expenses for reform, change and improve competitiveness in the future.

The application of trade defense measures are only a temporary cure when there are fluctuations in the long term, to be able to actively compete with imported steel and avoid technical barriers, the service defense when exporting events, steel enterprises should actively improve internal resources and products with high competitiveness, thereby building the steel industry synchronous and modern. This also contributes to creating a fair business environment for enterprises.