Local steel companies must become more competitive

Dung wrote in an article to the Vietnam News Agency that local producers must revamp their production technology to build a competitive industry.

Although trade defence instruments were essential to protect local production, the use of these instruments might result in inefficiency if it failed to balance the interests of the relevant parties, he added.

Dung said trade defence instruments might cause a conflict of interest which had been proved through the recent use of safeguard duties on imported steel products.

For example, producers who manufactured steel ingots might support the imposition of duties, while those importing cheap steel ingots for their production and consumers who pay higher prices, might oppose the policy.

The Ministry of Industry and Trade in early March announced a decision to issue temporary safeguard duties of 23.3% on steel billets and 14.2% on steel bars for a maximum of 200 days.

In the long term, Dung said trade defence instruments were just passive protective measures, urging steel firms to renovate production technologies to be able to actively compete with low-priced imported steel, especially from China, the world’s top steel producer, which was facing excess capacity and ramping up exports in recent years.

The aim was to develop a competitive industry through the application of modern production technologies, he wrote, and added that the in-force safeguard duties were offering opportunities for local producers to renovate their production and hasten restructuring to lower price and enhance quality.

The Vietnam Competition Authority will host a public consultation meeting on May 5 on the duties imposed on imported steel.

After safeguard?

The local steel industry must find ways to ensure development amid a global steel overcapacity crisis that China and other major steel producing countries were struggling to tackle.

According to Dung, after a decade of rapid development, Vietnam currently ranked second by production capacity in the Southeast Asia, after Thailand, with a total annual production capacity of more than 20 million tonnes.

However, the association’s statistics showed that the industry currently operated at only 55% of capacity, due to declining demand, competition from cheap steel products imported from China, and trade frauds.

Regarding exports, Vietnam steel producers often faced trade barriers set by importing countries, according to Dung, citing 12 trade defence-related lawsuits the industry faced in 2015 alone, while the use of trade defence instruments were still new to local producers.

Dung said local producers must join hands to stabilise the domestic market and be able to compete in the global market.

According to Nguyen Phuong Nam, deputy director of the Vietnam Competition Authority, the co-ordination along with local producers from giants to small-scale firms and with the government relevant agencies, was critical for the success of trade defence instruments.