Steelmakers ignore oversupply

Steel companies have expanded production by building new plants or increasing capacity, despite warnings about an oversupply of steel from government agencies.

The Viet Nam-Germany Steel Pipe Joint-Stock Company (VG Pipe), for example, has opened a factory with a production capacity of 350,000 tonnes of construction steel a year.

Le Phan Duc, deputy general director of VG Pipe, said the company had traded in construction steel before building a pipe steel factory in 2002.

Although pipe steel is now the company's main product, VG Pipe continues to trade in construction steel. Because of its distribution system and customer base, the company is confident that it can find buyers for its products.

Pham Chi Cuong, chairman of the Viet Nam Steel Association, said the Hoa Phat Group recently opened a new production line for construction steel, while Vinakyoei Joint-Stock Company raised its production capacity to 500,000 tonnes from 300,000 tonnes per year.

The Government last year called a halt to licensing of steel projects that do not have guaranteed sources of iron ore or do not make special steel, but many localities still granted licenses for common steel projects, according to Cuong.

"It could lead to a drastic competition to scramble for customers, with many steel plants operating below their designed capacity," Cuong said. "It's unreasonable if we continue to license foreign investors for steel projects that produce normal construction steel."

The production capacity of existing steel plants was too high compared to domestic demand, while export markets for steel products had not showed a clear sign of recovery, he added.

Once giant projects as the steel complex and Son Duong Port by Fomosa Heavy Industries Corp loated in the central province of Ha Tinh, or the steel project invested by Taiwan-based Guang Lian in Dung Quat Economic Zone are put into operation, supply will further exceed demand.

According to the Ministry of Industry and Trade, the country has 65 steel projects, 32 of which have been licensed by local authorities. These are not included in the Steel Development Plan and were not approved by the Government.

As a result, many steel projects have had to cease operations due to material shortages, causing large amounts of waste.

Source: VNS