Consumption remains low

As the building season is on its way, steel consumption is expected to surge as following a continuous fall in prices. In fact, it remained at a lower level than in the previous months, according to the Vietnam Steel Association (VSA).

In October, only 286,000 tonnes of steel was sold, over 100,000 tonnes lower than in August.

Pomina Steel Mill’s CEO Truong Quoc Thai said that despite the drop in prices, steel consumption has fallen by about 30 percent since early this year.

According to an official from Thai Nguyen Iron and Steel Corporation, the fall in the steel consumption is because consumers are waiting for further price cut.

Reasons for the reduction

According to the VSA’s Vice Chairman Nguyen Tien Nghi, there are two reasons for the decrease in domestic steel consumption. Firstly, the prices of steel ingots in the global market fell by US$50-60 per tonne in September. Secondly, steel supply far exceeds demand in ASEAN and Chinese markets and these countries are promoting steel exports to Vietnam.

Since the beginning of 2009, Vietnam has imported an average of 35,000-40,000 tonnes of steel every month, causing an imbalance between supply and demand in the domestic market.

Steel imported from other ASEAN countries is now being sold at around VND500,000-700,000 per tonne cheaper than domestic steel and that is one of the reasons for the fall in consumption.

Another reason for the reduction, Mr. Thai said, is that businesses are speculating before the building season gets underway. He added that it is almost impossible to reduce steel prices as businesses are worried about fluctuating exchange rates.

Despite gloomy forecasts, the VSA and businesses believe that domestic steel consumption will pick up by the end of the year.