Brilliant Lim: Vietnam’s steel industry will face both challenges and opportunities with more imports

Vietnam Germany Steel Mill Joint Stock Company was founded in 2002 on an 18-hectare site in Binh Xuyen Industrial Zone, Vinh Phuc province. In 2008, Vietnam Germany Steel Mill was listed on Hanoi stock exchange with the stock exchange symbol VGS. As a major steelmaker in Vietnam, the company produces HRC, CRC, HDG and steel pipe with modern lines and products which meet international standards.
Asian Metal: Hi Brilliant Lim, thanks for accepting the interview firstly. Could you please give us a brief introduction to your company’s main business activities?
Brilliant: OK. Currently our company has output of 350,000 tonnes, 300,000 tonnes, 150,000 tonnes and 150,000 tonnes per year for HRC, CRC, HDG and pipe respectively. Operating revenue can reach VND7 trillion (about RMB2 billion) in a year. Currently, we have one HRC production line, two CRC production lines, nine pipe production lines and two HDG production lines. All lines are running with full capacity at the moment and we are planning to add a few in the future.
Asian Metal: As we know, steel markets in many Asian countries have been very dim recently. Prices for rebar have been falling in 2015, while the rebar market in Vietnam has continued to run relatively steadily with prices staying firm during that time. What are the reasons for this? Is the import production policy the major reason?
Brilliant: A lot of people from Taiwan came to Vietnam in past years and brought some demand, which is the main reason. Twenty or 30 years ago, many people from Taiwan swarmed into China’s manufacturing industry. They have turned to Vietnam in recent years. As a consequence, some related industries had a chance to develop with more and more investment. The construction industry is the one that has benefited most. People will immediately want to build a house when they get some money. It is the reason why demand for iron and steel is relatively strong in Vietnam. I predict that the situation will last for about 30 years.
Vietnam had an import protection policy some years ago. The policy was carried out to ensure we didn’t bear the brunt of exports from China during the steel industry recession. This policy is not the major reason for the steel industry boom in Vietnam but it is a favorable measure to help the industry develop in a steady way and ease the burden from China.
Asian Metal: Has Vietnam introduced any policies for imported square billet?
Brilliant: One per cent import tax will be collected from importers of square billet. This is not a policy aimed at Chinese exporters.
Asian Metal: It is reported that Vietnam imports a large number of billets from China. What have been the consequences ofcheap billets from China?
Brilliant: As far as I am concerned, Vietnam’s import volume of billets from China will continue to increase in the future. It was reported by Vietnam Steel Association that Vietnam imported 67,500 tonnes of billets in October of this year and this is not a large figure. In my opinion, consumers will benefit if Vietnam does not restrict the imports. Products will be more and more attractive in price and quality. On the other hand, maybe some smaller steel factories will be hit by this. However, there are also some opportunities alongside the challenges. These factories can make use of this time to improve their equipment and enhance their competitiveness.
Asian Metal: The output of iron and steel in Vietnam has increased sharply, coupled with development of the local economy. Does an oversupply of steel exist in Vietnam?
Brilliant: Of course. Oversupply is a global problem. However, in my opinion, it is a base for positive competition. If oversupply exists, the new and developed technology will survive and the old will die out. In this way, more and more cheap and environmentally-friendly products with higher quality will be produced. Above all, consumers are the final beneficiary.
Asian Metal: 2015 has been a difficult time for the steel industry. Many steel mills in Asian countries, including those in China, have been burdened with a lot of losses in the past year. However, participants show little optimism regarding the market outlook. Do you think the steel market will show some improvement in China next year?
Brilliant: I think the market will hardly see any improvement in the short term, and it may be worse. It will take a long time. The darkest hour is that before dawn. I predict that the price of steel billet will come down to a reasonable level below USD200/t, as was seen before 2011. I hope that steel mills in China have a clear appreciation of that. They should not struggle to produce more because they will bear greater losses in this way. The best option will be to withdraw funds and find another chance to restart. Here, I want to find some partners through Asian Metal and maybe we will have a chance of cooperating in Vietnam.
Asian Metal: What do you think is the point of a company remaining invincible when the steel market is unpromising?
Brilliant: I think financial resources and production capability are the main factors. As we know, steel companies in China can scarcely get loans from banks due to credit issues, which restrict them from developing. In addition, a company should continue to improve its production capacity, upgrade product quality and do more to meet customers’ needs.
Asian Metal: Do you have a development plan for your company?
Brilliant: There have been four or five steel companies that invested a lot on importing equipment but in each case the company’s production capacity is less than 500,000 tonnes per year. Of course, we will also invest more on equipment in the future but we prefer to hold a cautious attitude towards the market and wait for our national leader’s next strategic decision. We need to adapt ourselves to the development of the society.
Asian Metal: Thanks for sharing your views. I wish your company a bright future.