Steel mills have got fat profit as they have been able to buy ingot steel at low prices and sell at high prices. A source said the profit the mills earned in June and July reached several tens of billion dong.
In the first six months of the year, ingot steel imports reached 1,083mil tonnes, and in May alone, the import volume was 375,000 tonnes. Currently, steel mills mainly use ingot steel imported in May at lower prices to make finished products.
Considering that the steel mills bought ingot steel at $485/tonne (VND7.8mil/tonne) and sold at VND10.2mil/tonne, they would make the profit of VND1mil/tonne. If an enterprise sells 10,000 tonnes of steel at that price the profit it reaps is VND10bil ($0.625mil).
Meanwhile, the escalating price of steel has caused losses for the national economy. According to Nguyen Tien Thoa, Head of the Pricing Department under the Ministry of Finance, the government has to spend VND1,800bil ($112.5mil) more on the projects using state budget sourced capital due to the increased steel price. A lot of construction works have been halted as they need more capital to cover the steel price increases.
In its latest move, the government has asked the Ministry of Finance to set up an inter-ministerial team in charge of inspecting steel mills. Nguyen Tien Thoa, Head of the Price Control Department under the Ministry of Finance, said that the inspection was necessary in this context, as the government has been applying drastic measures to curb inflation but failed to force the steel price down.
Mr Thoa said that when material prices increase, steel producers raise the selling prices of finished steel immediately, but when material prices decrease, steel producers do not reduce their selling prices.
According to the Vietnam Steel Association, the ingot steel imported in July 2007 from China fell by $10/tonne to $510-518 CFR; however, the prices of finished steel remain unchanged.
Now steel mills are selling construction bar steel at VND9,800-10,200/kg (not including discounts and VAT), and rolled steel at VND9,200-10,000/kg, which are equal to that in June 2007.
In June 2007, when the ingot steel price began increasing to over $500/tonne, steel producers immediately raised the selling prices to over VND10mil/tonne.
Analysts have pointed out that steel mills did not make steel with expensive ingot steel, because the ingot steel volume imported in June and July, when the price increased, was low. In June, for example, ingot steel imports were 121,000 tonnes only, while the figure was 100,000 tonnes in July.
It is expected that ingot steel will decrease further in August thanks to stable supplies. However, there are no signs of finished steel price decreases.
Source: VNE
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