Steel dealer loses billions due to speculation

After several major steel producers pledged not to increase prices, construction steel in the market has gradually cooled down.

After the Ministry of Industry and Trade decided to impose temporary trade protection tax on steel billets and construction steel, steel prices were pushed up due to speculation in the middle stage. However, after some major steel manufacturers pledged not to increase prices, dealers were forced to reduce their selling prices.

Currently, the retail price of steel on the market has dropped to 11,000-11,500 VND per kilogram depending on the type and brand, 15% lower than at the end of March. This development has caused many places to "hold" goods with the goal of speculating and waiting for prices to increase, suffering heavy losses. The common price ranges from about hundreds of millions of VND for third-level dealers to billions of VND for first-level dealers.

Many steel dealers have lost hundreds of millions to billions of dong due to "holding" steel at high prices. Photo: Investment

The most common are second-level dealers, who "hold" goods when steel prices are high, with the expectation that steel prices will continue to increase. A store in Phung town, Hanoi, collected a large amount of goods when the price of steel was 12.5 million VND per ton, but now sells it for only 11-11.3 million VND.

According to the owner of Yen Vinh steel dealer (Hung Yen), the selling price has decreased by about one million VND per ton compared to the end of March, so this facility has lost about 100 million VND with a shipment of approximately 100 tons imported before. The owner of this store said that people's purchasing power is very low, most of the steel stores and dealers along the road from Pho Noi to Khoai Chau have suffered some losses, because the selling price of steel has decreased a lot compared to when they bought the goods 15-20 days ago.

In Hai Duong, the owner of the steel and cement retail store Chien Nhung also shared that the amount of inventory in the store is always from a few dozen to hundreds of tons, but the price has decreased by 10-15% compared to just half a month ago, causing the store to lose nearly a hundred million VND.

Lower-level stores also became victims when first-level agents speculated and hoarded goods for profit. Before Tet, many second-level distributors of steel manufacturers received orders from people at prices of around VND10,000 per kilogram, with volumes of around 100-200 tons, or 300-400 tons for larger facilities. However, after Tet, when first-level agents of steel manufacturers learned about the Ministry of Industry and Trade's temporary imposition of self-defense taxes, they speculated and did not supply goods to the system, coupled with the poor supply capacity of some manufacturers, causing the market to experience a virtual demand fever.

Despite the high prices, lower-level agents still have to accept losses, importing goods to pay for pre-orders, resulting in a loss of up to 2 million VND per ton of steel.

Mr. Nguyen Ngoc Anh, Chairman of the Board of Directors of SMC Company, a steel distributor in Ho Chi Minh City, said that steel prices were pushed up partly due to problems with the distribution system, which in turn affected consumers, especially in the retail market.

According to Mr. Nguyen Van Sua - Vice President of the Vietnam Steel Association (VSA), March is the time when steel demand increases according to annual practice, projects restart after a long Tet holiday, but the psychology of wanting to buy goods after the decision to temporarily impose self-defense tax by the Ministry of Industry and Trade (March 7) also contributed to the increase in steel prices in the first quarter.

Despite the sharp increase in steel prices in the first quarter, as of the end of March, according to VSA, steel inventories were still around 325,000 tonnes. The market will have an additional supply of around one million tonnes of steel from a series of new projects coming online this year.

“This shows that businesses are fully meeting market demand, so agents and distributors do not have to worry about hoarding steel,” Mr. Sua emphasized.

According to VNE