VietNamNet Bridge – The Vietnam Steel Association (VSA) has officially asked the Ministry of Industry and Trade to allow its members to raise steel prices. “Steel price increases prove to be indispensable as ingot steel prices are skyrocketing,” it says in the document it sent to the ministry.

In fact, some southern steel producers have raised their sale prices already. Pomina, for example, has raised the sale price from VND16.426mil/tonne to VND17.45mil/tonne, while Vinakyoei has raised the price from VND16.55mil/tonne to VND17.5mil/tonne. Other steel producers are offering steel at VND17mil/tonne on average.

The steel prices quoted by northern producers prove to be much lower. VIS, Hoa Phat and Vietnam-Australia are selling steel at VND16.5mil/tonne, while Thai Nguyen Company is selling at VND15.2mil/tonne.

Southern steel producers say that they now have to import ingot steel at high prices. Vietnam-Japan Company, for example, has signed a contract to import ingot steel at $1,180/tonne, while finished steel is selling at $1,000/tonne.

Pham Chi Cuong, VSA Chairman, said that VSA pledged to keep steel prices in place until the end of June 2008, if the ingot steel price did not exceed the $900/tonne threshold. At the time of the commitment, ingot steel was at $810/tonne, while the sale prices offered by northern producers were at VND15.2-15.4mil/tonne, and the prices offered by southern producers were at VND15-15.3mil/tonne. However, as the ingot steel price has been skyrocketing, some steel producers had to raise their sale prices in May 2008.

“Raising steel prices proves to be unavoidable. Steel mills cannot buy ingot steel at $1,300/tonne and then sell finished products at $1,000,” Cuong said.

However, Cuong confirmed that the steel price will not increase sharply, because the purchasing power is low in the rainy season. In the past three months, VSA members sold only 260,000 tonnes of steel a month, a decrease of 60,000 tonnes compared to previous months.

“The sale prices will be decided by the market,” Cuong said.

In fact, steel producers now still make steel with the ingot steel it imported several months before at low prices. Therefore, they don’t make loss even with the current sale price of $1,000/tonne. However, Cuong said that if producers continue selling at low prices, they will not have money for re-investment.

Tran Thuy