Vietnam’s Existing Iron and Steel Industry

Not too long ago, until the late 1990’s, when we talk about the iron and steel industry and market, Vietnam was lumped in the company of countries like Laos, Cambodia, Burma, Bangladesh, etc. But with its pro business, and state industrial policy where foreign capital was welcomed with incentives,, it has leapfrogged from this status to being on the verge of being among its equals with ASEAN and even the Asian region as well, among the likes of Thailand, Malaysia, Indonesia, and definitely surpassing the Philippines. With its 85 million population (almost similar to the Philippines), its present total steel demand has reached 10 million MT, more than 3 times the Philippines. This is broken down as follows:5.61 million MT for long products and 4.61 million MT for flat products. 2006 figures for steel per capita is 2244 versus the Philippines which is only around 1800.

Such “open” policy allows businesses to be owned 100% by foreign investors. What is not allowed, typical of Communist governments, is ownership of land, which is still retained by the State, although long term lease of up to 50 years is permitted.

Vietnam steel industry took an aggressive development, and growth starting late 1990’s . Hence, most of the plants and mills, especially all that we have visited, were constructed only after 2000. That is why, we can conclude that Vietnam’s steel plants are new and modern, many of them built and supplied by known companies such as Danielle- Wean United from Europe and America and POSCO in Korea: There are those that have been sourced from China (for its mechanical parts) but process controls and electrical systems were supplied by Siemens, the top supplier as far as controls is concerned. Their technical men have been likewise trained abroad in Europe and China.

Notably, Vietnam’s expansion followed the model of “backward integration”: The plants we visited employed this model. Ton Hoa Sen started as a distributor, then put up its color coating line, then galvanizing line and galvalume line and this year commissioned a cold-rolling mill. Sun Steel started as pipe manufacturer then expanded by putting up its own color coating line and finally a galvalume line.

Accordingly, there are now around 21 galvanizing/ and color coating lines throughout Vietnam.

They said that after years of continued and increasing growth, Vietnam got hit by recession this year with interest rates going up more than 20%. And with such huge production capacities, the steel crisis have hit them for 3 consecutive months now reportedly starting September and continued to October and November..December is projected to behave the same. They are at present holding a total steel inventory of 3 million MT (combined flat, long, section- all steel types), a figure almost already equal to the Philippine annual demand.
The business mood right now is “no business- wait and see” attitude; no movement, no price quotation.

It's interesting to know that like China, Vietnam has cheap labor, even cheaper than the Philippines.