Steel price continuously increased day by day and set a new peak when it exceeded 17,000 VND/kg on May 8. With this upward momentum, will steel prices slide in the "trace of 2008" - the post-financial crisis period?
LESSONS FROM 13 YEARS BEFORE
If at the beginning of 2020, the price of construction steel only fluctuates at 11,000 - 12,000 VND/kg, then by the end of 2020 it has increased to about 15,000 VND/kg, and by the beginning of May 2021, steel price has increased. at over 17,000 VND/kg.
Looking back on the lessons of 13 years ago - 2008, then in the first months of the year, the world steel billet price increased continuously, sometimes reaching thousands of USD/ton, leading to an increase in domestic steel prices by tens of millions of dong/ton. , up 22,000 - 23,000 VND/kg.
When the domestic steel price started to increase, many commercial enterprises and steel dealers rushed to collect goods in stock with the quantity increased 5-10 times normal; When the price has reached the “top”, they still refuse to sell because they hope the price will continue to rise. However, in August 2010, the world billet price suddenly dropped to 330 USD/ton, pulling domestic steel price down sharply. As a result, many commercial and steel businesses fell into the situation of "failure".
In the first months of 2021, the situation is also evolving in a similar direction. Steel prices continuously increased in the first quarter of 2021, especially in April 2021, up to 40-50% compared to the fourth quarter of 2020, causing many businesses using this material to "stand still".
Talking to VnEconomy recently, Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors, expressed his concern because steel is the raw material that accounts for the highest proportion in the construction cost, with a high speed. Steel prices increase by 40-50% so construction contractors across the country are in danger of breaking up and going bankrupt.
Even, the price of steel increased so quickly that many opinions questioned whether there was a "handshake" between steel companies, or the phenomenon of speculation to raise the price of this item. However, according to the assertion of the Ministry of Industry and Trade, the Vietnam Steel Association and enterprises in the steel industry, there is no basis to conclude that steel enterprises "shake hands" to push up steel prices.
It is difficult to hoard goods at large production facilities because of the limited warehousing, costs and working capital of the steel industry. The market management force has checked, reviewed and the above situation, if any, only falls on a few small dealers, not in large production facilities.
Analyzing the reasons for the continuous increase in domestic steel prices in recent years, the Vietnam Steel Association said that the factors affecting the domestic construction steel price mainly come from the sharp increase in raw material prices. Specifically, in March 2021, domestic scrap steel price increased by 300 VND/kg, staying at 8,850 - 9,100 VND/kg. Imported scrap steel price is at 438 USD/ton. Iron ore price on 5/5/2021 traded at 188-190 USD/ton CFR (cost plus freight) at Tianjin port, China, up about 50 USD/ton, equivalent to an increase of 25-39% compared to with the beginning of December 2020. Imported billet price also increased at 17 USD/ton, reaching 606-608 USD/ton.
STEEL PRICE IS IMPACT FROM MATERIALS PRICE
Domestic production of billet currently only meets about 30% of the market share, the rest depends entirely on raw materials imported mainly from China. But China is restricting the export of ingots to adjust the price increase, which makes importing countries including Vietnam passive about raw materials. “It is expected that in 2021, Vietnam will continue to have to import many types of raw materials for steel production such as iron ore for blast furnaces about more than 18 million tons, scrap steel about 6 - 6.5 million tons for furnaces. electricity", emphasized the Vietnam Steel Association.
The increase in steel price not only comes from the high price of raw materials, but also from the lack of supply, especially in the US and European markets. In addition, the tense trade situation between countries around the world, the impact of the Covid-19 pandemic, the trend of increasing trade protectionism are also causes affecting steel prices.
Talking about this reason, Mr. Nguyen Ngoc Thanh, Deputy Director of the Industry Department (Ministry of Industry and Trade), said that there is tension between Australia and China about two-way trade relations, which limits the amount of raw materials from Australia exports to China, which is the largest supplier of steel production in the world. Moreover, in order to protect the environment, China is cutting production of finished steel, billet, and hot rolled steel. This is the cause of the increase in steel prices.
According to the forecast of the Ministry of Industry and Trade, the demand for steel in 2021 may increase by 3-5% compared to 2020. However, the steel market will continue to be unpredictable.
In this regard, Mr. Nguyen Van Sua, a longtime expert in the steel industry, said that in 2021, the price trend of raw materials and finished steel products in the world will have many fluctuations. new price level as in the post-financial crisis period of 2008. Moreover, China's scrap import policies will affect the global scrap market in 2021. Because the country has a large domestic demand with The dual task of recovering from Covid-19 and opening the five-year economic development plan 2021-2025.
SET EYES WITH A NEW PRICE
Currently, many countries are promoting infrastructure investment to revive the economy and overcome the post-Covid-19 recession, but according to Assoc. Tran Dinh Thien, former Director of the Vietnam Institute of Economics, not only in a short time, but countries can massively invest in construction so that the shortage of steel leads to rapid price increases like now. Steel prices increased sharply mainly due to the lack of balance in production, supply and demand of Vietnam's steel.
In this regard, in the proposal submitted to the Government to consider reducing import tax, some input materials of the steel industry recently, the Ministry of Industry and Trade also acknowledged that the current production capacity of construction steel is about approx. 14 million tons/year, ensuring 100% for domestic consumption demand as well as for export demand.
“In terms of supply capacity, it is redundant, but supply is another matter because the Covid-19 epidemic caused factories to close, while logistics problems caused the source of raw materials to be interrupted, so production could not be increased. With this situation, the steel market is likely to establish a new price level. However, after the epidemic situation becomes more stable, steel prices will be adjusted according to the supply-demand relationship," the petition stated.
Facing the recent complicated and unpredictable developments of the world steel market affecting the domestic steel product prices, the Vietnam Steel Association has issued Official Letter No. 27/2021/HHTVN recommending member businesses implemented many solutions to boost production to stabilize domestic supply and meet market demand.
The association also requested member businesses to provide information on factory capacity, production and sales plans in the second quarter of 2021 and expected the whole year of 2021 to summarize and report to state agencies and media. providing information to steel consumers, contributing to ensuring the stability of the domestic steel market in the coming time.
On the part of the management agency, the Ministry of Industry and Trade said that it will strengthen market management to prevent and promptly handle the phenomenon of speculation to increase steel prices, trade fraud, causing loss of state budget revenue and affecting the state budget. to consumers. At the same time, continue to build technical barriers and quality standards to create a healthy competitive environment and ensure the interests of consumers; proactively implement trade remedies for steel products in accordance with trade regulations and international laws.
Monitor and see timely handling of anti-dumping of some steel products imported into Vietnam market as well as dealing with anti-dumping lawsuits of other countries against Vietnam's exported steel products. to minimize damage to steel manufacturing enterprises.
PRESSURE OF COUNTRY STEEL PRICES
"Steel prices have continuously increased in recent years for many reasons. First is the influence of the world market of steel materials and products, especially the Chinese market, which accounts for nearly 60% of production. global crude steel.
The main factors that are dominating this market affecting global steel prices are: tightening steel supply in line with the Chinese government's policy on pollution control; information to reduce export tax refund from 13% to 9%, even 0% to reduce steel export output; China's steel production costs in 2020 are higher than those of other countries, making the country's imports of semi-finished products (crude steel) surged to an all-time high in the third quarter of 2020.
Besides, the global economy is recovering, which means that the world's demand for steel increases, while the forecasts of the Organization for Economic Co-operation and Development (OECD) and international organizations all confirm. Global steel capacity this year has not been able to recover as before the pandemic. That means, steel prices will likely increase. In addition, the current increase in steel prices is also affected by high transportation costs and lack of shipping containers.
Not to mention, the production capacity of steel products (construction steel, steel pipe, galvanized sheet) of Vietnam's steel industry has met the demand of the domestic market, but raw materials (iron ore, steel scrap), fuel, etc. Regular consumables and materials (coal, coke, electrodes, refractory materials...), spare equipment for steel production are mostly imported, so Vietnam's steel market is dominated by Global market".
Source: https://vneconomy.vn/ghim-cuong-gia-thep-cach-nao-647690.htm
