Vietnamese market players predict a considerable price rise in domestic steel prices following the introduction of new iron ore prices from April 1, 2008.
According to Hoang Van Tong, deputy general director of Vietnamese steelmaker Thai Nguyen Cast Iron and Steel Corporation, the 65 percent increase in iron ore prices (the currently agreed increase in the iron ore prices amounts to 65 percent) means an increase of $70 for every metric ton of iron ore. Besides, steel producers will also have to pay an additional $40/mt for transportation costs and also a rise in coal prices. All these will certainly lead to higher production costs of ingots and finished steel products.
With an estimated 65 percent increase in iron ore prices, many steel producers in Vietnam predict a rise in ingot prices to over $800/mt.
In 2008, Vietnam will need around four million metric tons of steel ingots. However, with local production totaling only two million metric tons, domestic steelmakers have to import the balance, primarily from China and the CIS. Yet, China's plans to cut production may mean a reduction in ingot supplies to Vietnam.
Although many Vietnamese steel producers do not believe an ingot shortage will happen, they are all united in the opinion that prices for steel ingots will be very high. Taking into consideration the probability of high ingot prices combined with the increase in raw material prices and transportation costs, finished steel products will see an unavoidable increase in the Vietnamese domestic market.