The Vietnam Steel Association (VSA) has declared that a decline in local demand caused the country's steel industry to face negative growth in 2008, with combined steel consumption and exports at about 4.45 million mt, a drop of 300,000 mt as compared to 2007.
According to the VSA, steel demand will be affected by the rise in value added tax which took effect on January 1, 2009. The VSA added that in 2009 Vietnam is expected to import about 5 million mt of steel to meet domestic demand which is estimated at 10.5 million mt for the year.
VAT in Vietnam has increased from five to 10 percent, raising retail steel prices by more than VND 500,000/mt ($28.57/mt), according to the VSA which had asked the government to defer the hike until after July.
On the other hand, Vietnam's Ministry of Industry and Trade said the steel demand for construction in the country and for exports would reach 4.95 million mt in 2009 but that the industry would have to import 800,000 mt to meet this demand as local steel mills could only supply about 4.15 million mt.
The ministry has asked local producers and investors to boost steel production and expedite iron ore mining projects that are set to commence operations in 2009, in order to address the imbalance in the local steel market.
Vietnam imported 7.92 million mt of steel worth $6.57 billion in 2008, including steel for the construction and auto industries, according to the General Statistics Office. The office added that imports dropped by nearly two percent in volume but increased by 28.56 percent in value year-on-year.