Short-term fix may harm steel producers

In the draft decree amending Decree No.57/2020/ND-CP, submitted to the government on July 13, the Ministry of Finance (MoF) suggested increasing the export tax for steel billets to 5 per cent while reducing preferential import tax for some construction-related steel products. These suggestions are made to stabilise the supply of billets for domestic production and limit exports, thereby also stabilising prices in the market.

However, analysts are concerned that the adjustment could lead to changes in the market, and have raised concerns about inflation. Steel makers are negatively affected by the pandemic – a time which seems unsuitable for sustainable development goals in the long term.

Imposing new tariffs on the steel sector could affect state budget revenues, an important factor that the MoF acknowledged in its presentation of the draft amendment.

Meanwhile, many public investment projects are dealing with the pandemic and rising steel prices. For instance, Trung Chinh TC Co., Ltd. was forced to change its financial plan for the phase-2 Vinh Tuy Bridge project in Hanoi because steel prices hiked by about 40 per cent to up to $830 per tonne. In its original plan for the bridge, the company estimated an average price of $480 per tonne.

Steel prices have seen a long bullish streak since the beginning of the year. Based in the northern province of Thai Nguyen, TISCO JSC, which holds about 10 per cent of the domestic steel market, is one of the few steel producers whose profits have increased thanks to partial autonomy in raw materials. Total revenues of TISCO in the first five months of 2021 increased by 35 per cent on-year.

As steel prices increased, many contractors have been pushed into losses. Vu Xuan Tuyen, director of Viet Thai JSC in Thai Nguyen, said that all of its six projects signed in 2020 are behind schedule, and two of these had to be suspended.

Data from the Vietnam Steel Association (VSA) showed that the picture began greying for the steel industry when the current COVID-19 wave started at the end of April.