Steel producers hiked prices by hundreds of thousands of dong per ton before Tet, the latest in a series of hikes, saying it was unavoidable considering the high import content and rising costs of the imports.
Vina Kyoei Steel based in Ba Ria-Vung Tau Province increased the wholesale price of its wire rods (rolled steel) to VND13.56 million (US$849) per ton, and steel bars to VND13.58 million.
Compared to mid-January, the prices went up by several hundred thousand dong.
Two days later, the Vietnam Steel Corp. (VNSTEEL)’s southern arm also put up the prices of its Southern Steel brand by VND550,000-800,000 per ton.
Earlier, the Binh Duong Province-based Pomina Steel had increased prices by VND800,000 to over VND1 million.
After three increases in the recent past, Thai Nguyen company’s wire rods now cost VND13.33 million and steel bars around VND13.62 million.
The steel industry blames the price hikes on the high import content in their manufacturing.
For instance, it says, the steel billet used in manufacturing now costs $735 per ton, up $15 since January.
Over 60 percent of the country’s steel producers depend on imports, mostly from China which recently increased export tax on billets to restrict exports.
Some steel producers also blame the price hikes on the many layers of middlemen involved in distributing their products to the end users.
They point out that while their prices are below VND14 million per ton, consumers pay up to VND17 million.
But they admit that small producers can’t afford to open a distribution network to sell directly to end-users.
Vice chairman of the Vietnam Steel Association, Pham Chi Cuong, agrees that to control retail prices producers need to establish their own distribution channels.
“But this is beyond the capacity of most producers, state-run or private,” he adds.
Builders losing
Head of HCMC-based Nam A Construction Ltd., Nguyen Duc Hung, says big and small construction companies and investors are all suffering from the rising steel prices.
The Vietnam Textile and Apparel Association’s supermarket chain Vinatexmart, which has plans to build three outlets at a total cost of VND600 billion ($37.6 million), began one of them earlier this year.
But its head, Nguyen Thi Hong Huong, says with steel prices continuing to go up after Tet, the company might have to put the project on hold.
“It’s difficult to find builders since they are hesitant to commit themselves at this time of constantly changing steel prices,” he adds.
An investor in an ongoing apartment project in HCMC’s Thu Duc District says the latest steel hike cost him an extra VND10 billion ($612,154).
Steel producers gaining
Analysts say the increasing demand for steel for construction work is causing the upward pressure on prices.
They estimate an increase of 30 percent in new construction work this year compared to 2007.
The head of a steel company says every day his company delivers steel for at least 10 new construction projects.
Other producers say the demand for steel is sharply increasing after the government began to enforce a law that requires investors to complete the foundation for apartment towers before selling units.
VNSTEEL says the demand for construction steel is far in excess of local supply.
Last year, local manufacturers were able to provide only 3.95 million tons against a demand of 4.73 million tons.
VNSTEEL estimates the demand to rise to 5.5 million tons in 2010 and 8 million in 2015.
To meet the growing demand, steel imports have risen from 197,000 tons in 2004 to almost 778,000 tons last year.
Experts calculate that producers buying billets at $735 per ton make a profit of at least VND300,000 per ton of steel products.
Those producing their own billet earn around VND2 million.
Source: Thanh Nien News