Table 13: Vietnam exports of iron and steel products (metric tonnes) (20102014)

2010

2011

2012

2013

2014

Iron products (Pig iron)

25,225

19,658

300

100

74,000

Ferro alloys

27,291

53,201

79,000

300,000

Semi-finished products (Billet)

11,300

221,956

365,000

354,000

392,000

Hot-rolled steel products

967,500

1,149,358

476,000

740,000

726,000

20,600
160,300

786,000

27,454
292,336

829,568

54,000
360,000

33,000
29,000

79,000
468,000

193,000

1,000
116,000
260,000
274,000
30,000
45,000

50,700

123,681

497,000

395,000

522,000

50,700

123,681

421,000
76,000

370,000
25,000

448,000
74,000

Coated sheets & strips

226,700

385,152

485,000

803,000

596,000

Pipes & tubes

36,300

95,611

203,000

207,000

427,000

7,500
28,800

10,444
85,167

12,000
191,000

18,000
189,000

23,000
404,000

14,800

24,290

60,000

36,000

88,000

1,359,816

2,072,907

2,165,300

2,535,100

3,125,000

Rails & accessories

Sections
Bars
Wire rods
Plates
Hot-rolled sheets & strips
(carbon steel / alloy)

Cold-rolled sheets & strips

-

Carbon steel
Stainless steel / alloy

Seamless
Welded

Cold finished & cold formed

(Steel wires)
Total iron & steel products
Source: SEAISI

2.2

Tax regime

In the tax reduction roadmap, import duty tariffs from ASEAN will be reduced to 0% by Dec 31,
2015. This will reduce Vietnams protection of domestic steel market. Vietnams steel industry
has suffered from the hefty import volume of Chinese steel at unfair prices. Vietnam exempts
alloy steel with chromium from import tariffs while non-alloy steel products are taxed at 9%.
Many Chinese exporters thereby claim their products contain 0.3-0.4% chrome content to enjoy
the tariff exemption. But the very small chrome content does not affect the quality of steel billets,
businesses can turn them into steel products used for construction, instead of importing the
highly-taxed non-alloy steel billets, according to the VSA. Taking advantage of the loopholes,
1.2mn tonnes of alloy steel billets were imported into Vietnam in Jan-Sep 2015, 75% of which
came from China.
Table 14: Vietnam import duties of selected steel products under AFTA and ACFTA
Products

AFTA

ACFTA (China)

2006-13

2014-15

2006-13

2014-15

Scrap of alloy steel

0%

Bars and rods of non-alloy steel

5%

0%

0%

0%

5%

18%

9%

Wire of iron or non-alloy steel

Welded tube of stainless steel

0%

0%

5%

5%

5%

5%

5%

5%

Sources: VPBank Securities (VPBS) Research; Ministry of Finance

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Vietnamese steelmakers are hurt by the huge imports of Chinese products, which rose 62% y/y
to 7.7mn tonnes or USD 3.5bn in Jan-Oct 2015, according to Vietnams Customs Department.
Chinese steel accounted for 61% of Vietnams total imports during this period. The average
import price dropped by 25% y/y which resulted in a marginal change in import value. Domestic
manufactures are facing tough competition as global steel prices have fallen sharply while the
local market is flooded with cheap imports, according to the VSA.
2.3

Foreign investment

The steel industry has picked up growth with foreign investors pouring investment into steel
projects, thanks to the gradual recovery of global and local markets along with the
implementation of favourable policies by the Vietnamese government. Vietnam managed to
maintain steady GDP growth at 6% and stable expansion of its domestic steel demand.
According to VSA, Taiwans China Steel raised its 5% stake to 25% in a steel complex under
construction in Vietnam Formosa Ha Tinh Steel (FHS), developed by a Vietnamese arm of
leading Taiwanese chemical company Formosa Plastic Group (FPG) pouring in about USD
940mn more into the project. The initial phase of construction will cost about USD 10bn, with the
facility coming on-stream by end-2015 with an annual crude steel production capacity of about
7mn tonnes. Japans JFE Steel Corporation invested USD 220mn to acquire a 5% stake in FHS
in a bid to expand its global network and provide technical support. Earlier in 2014, JFE Steel
dropped its intention to build its own integrated steel mill in Vietnam due to the global supply
glut. FPG plans to invest further in the second phase to expand the plants capacity to 22.5mn
tonnes per year.
Other investors, such as South Koreas POSCO, have also invested in big steel projects in
Vietnam to tap the potential rising steel demand. Moreover, the Ministry of Finance cited that it
would grant favourable incentives to foreign investors whose projects are located in special
difficult areas. For instance, the investor could enjoy 10% corporate income tax within the first
15 years instead of 25% while its plant employees would enjoy a 50% reduction in personal
income tax. The investor would also enjoy import tax exemption for input materials and
equipment that are not locally produced.
Meanwhile, Thai Nguyen Iron and Steel JSC (TISCO) restarted its second-phase expansion
project with productivity of 500,000 tonnes steel ingot per year, one of the Vietnamese steel
industrys biggest projects, which was put on hold for several years due to capital shortages. It
received nearly VND 1.4tn (USD 62mn) loan from Vietnam Development Bank in early 2015.
The project was approved in 2007 with a total investment of VND 3.8tn, and was scheduled to
be given a test run in 2011. However, problems arising from implementation forced investors to
adjust their investment plans, raising the initial cost to VND 8.1tn. In 2012, the project was
suspended due to lack of finance, after disbursing more than VND 4.5tn.
According to VSA, 42 projects have registered for operations in the 2013-25 period, of which 28
projects may not be feasible because they have failed to follow the regulations set by the steel
industry. Rampant investments in steel projects have triggered competition in the industry in
recent years as supplies of certain steel products such as ingots, construction steel, cold-rolled
sheets, pipes, galvanised steel and colour-coated steel are 1.5-2 times higher than needed.
Competition has forced many firms with weak financial positions and out-of-date technologies to
withdraw from steel projects.

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