Steel market... "downhill"

In contrast to the bustling price increase atmosphere of the first two months of the year, since the end of March until now, although entering the peak construction season, steel consumption is still very "sluggish", forcing businesses to reduce prices by 200-400,000 VND/ton.

Currently, the selling price of construction steel delivered to the factory ranges from 15.6-16.2 million VND/ton (excluding VAT).

The Vietnam Steel Association (VSA) said that in the first quarter of 2011, although construction demand was low, steel consumption increased abnormally, from 40-50% compared to the same period in 2010. However, from the second quarter until now, the domestic steel market has slowed down and is gradually decreasing in both output and price.

Explaining the above reason, VSA said that recently, the price of steel billets and scrap steel in the world market has tended to stagnate and decrease; at the same time, businesses also have to compete with steel imported from China and Southeast Asia, so the selling price of domestic construction steel has also decreased.

Steel manufacturing enterprises are facing fierce competition.

At the same time, ministries, branches and localities are implementing Resolution 11 of the Government on cutting public investment, so steel consumption has also decreased sharply. Due to the decrease in consumption, businesses have adjusted selling prices through indirect measures such as increasing sales discounts from 500-900 thousand VND/ton; supporting transportation; subsidizing projects to stimulate market demand, but consumption has not improved significantly.

Domestic steel prices also depend on world prices, so when world prices decrease, domestic prices will decrease accordingly. Rebar prices in North America are only 680 - 700 USD/ton, down 50 USD; in Türkiye, steel prices continued to decrease by 30 USD/ton compared to April. Although prices have decreased to 15.6 - 16.2 million VND/ton (excluding VAT), they are still much higher than world steel prices and those of some countries in the region.

The reason is that production costs and service costs are too high. Domestic transportation and loading costs are 2-3 times higher than in other regions; depreciation costs of domestic steel plants are still quite high, while steel plants in other countries have already completed depreciation.

Thus, competition is already difficult, domestic producers also have to face imported steel which is always cheaper than domestic steel, even though domestic steel has to bear more costs. Furthermore, in June, the southern provinces began the rainy season and the price of steel billet on the world market is still on a downward trend... Therefore, the possibility of increasing steel prices in the near future is very difficult and the steel business market has not yet been able to flourish.

At the meeting to evaluate the development of the construction steel market in the first months of the year, forecast trends and propose measures to ensure the balance of supply and demand of construction steel recently held between the Ministry of Industry and Trade, VSA and VNSteel, VNSteel Acting General Director Le Phu Hung said that to stabilize the market and control inflation, for many years, the steel selling price of VNSteel enterprises has always been lower than the market price, even at one point in 2008, VNSteel's steel selling price was 2 million VND/ton lower than the market price.

Since 2011, VNSteel's steel selling price has always been kept lower than the market price by 250-600 thousand VND/ton. In fact, with the consumption of more than 112 thousand tons in the first quarter, VNSteel's business efficiency has decreased by more than 41.7 billion VND due to the stabilization task.

Currently, steel supply is greater than demand, but there are still times and places where there is a shortage of supply, causing price fluctuations. This shows that there is a problem with the distribution system.

According to Deputy Minister of Industry and Trade Ho Thi Kim Thoa, currently many steel manufacturing enterprises, especially large enterprises like VNSteel, mainly invest in developing a few wholesale points and a few distribution systems, while the rest still depend heavily on the existing private retail system and have not focused on developing their own retail systems. Therefore, VNSteel as well as other enterprises find it difficult to regulate and control the steel selling price in the entire system.

This not only makes it impossible for the final steel buyer to get close to the manufacturer's selling price, but domestic manufacturing enterprises can also have their entire wholesale system taken over by foreign distribution enterprises, especially in the context of Vietnam opening up for integration.

Therefore, steel manufacturing enterprises need to invest more in retail systems and sales to the construction site to ensure stable output, thereby maintaining their position as market regulators. Typically, Vinamilk Dairy Company and Petrochemical Fertilizer Company (Phu My Fertilizer) have succeeded in building sales systems.

Along with that, businesses need to increase propaganda so that consumers have real information about steel supply to limit the situation of rushing to buy and hoard goods, causing abnormal price increases. The Steel Corporation also needs to increase communication about price stabilization policies, limiting the situation of shortage of goods due to psychology is also a solution to help limit the situation of virtual shortage of goods, causing price fever.

VSA said that the current amount of steel in stock at companies is 367,642 tons, steel billet inventory is 500 thousand tons, enough for consumption and steel production until July 2011. Therefore, the supply is still enough to meet consumer demand in the following months. However, consumption in May and June will decrease and prices will stagnate due to the lack of new construction investment projects. In case the price of steel raw materials in the world increases, domestic steel prices cannot increase dramatically.

According to VnEconomy