What is Driving Down Vietnam's Steel Imports in 2018?

According to the data from VSA (Vietnam Steel Association) country's steel imports have fallen by 11% y-o-y basis to 9.3 MnT in the first eight months (Jan-Aug) of 2018. However, in value terms, the country's steel imports were up by 10.2% y-o-y basis at USD 6.7 billion as import prices have increased sharply this year.

China is the biggest source of steel imports for Vietnam as in last year the country imported about 15 MnT of steel out of which about 7 MnT came from China. However, this year the steel imports from China seems to be fading away as although China has only released detailed data for the first quarter, its exports to Vietnam slumped by 46% to 1.33 MnT. This was driven partly by a 51.3% drop in wide hot rolled coil and sheet exports to 687,498 tonnes.

This decline can be attributed to factors such as heavy anti-dumping duties and anti-subsidy orders announced by the U.S. government on Chinese steel shipped from Vietnam, rise in Chinese steel import prices, and growth in Vietnam's domestic steel capacity and production.

China used to export steel to Vietnam which was later processed in Vietnam to be made corrosion resistant or cold-rolled for use in autos or appliances. However, U.S. Department of Commerce agreed to the American companies claim that the Chinese products were being diverted to Vietnam to circumvent the duties and subsequently imposed heavy anti-dumping and anti-subsidy taxes on corrosion-resistant steel and cold rolled steel from Vietnam. This significantly affected the Chinese steel imports to Vietnam.

In terms of prices, the average HRC import price of Vietnam from China has increased by about 15% in the first eight months of 2018 against corresponding quarter of the previous year.

Vietnam is also trying hard to become self-sufficient in terms of its steel requirement and reduce its dependency on imports as line-up of steel projects are being put into operation in 2018 which includes Hoa Phat Group's steel project in Quang Ngai province with capacity of 2 MnT per year, Hoa Sen Group's cold rolled steel production line in Binh Dinh province with capacity of 350,000 tonnes per year and three construction steel projects of Pomona, Vietnam-Italia and Tung Ho companies which will produce over 1.8 MnT a year.

Vietnam's steel export scenario

In terms of exports, as per the latest VSA's available data of Jan-Jul'18, the country exported about 3.41 MnT of steel which is 40.4% highest against the corresponding period of previous year. The highest steel exports were made to Cambodia at 717,572 tonnes (accounting for 37% of total export volume) followed by U.S. at 532,779 tonnes and Malaysia at 391,607 tonnes.

Although the steel sector has witnessed thriving exports, it is struggling to cope with trade defence lawsuits in the context of growing protectionism. From July 16 to August 9, the sector faced anti-dumping lawsuits in many foreign countries such as Thailand, the EU, Canada, Malaysia, the US, the Eurasian Economic Union, and India. As of the end of June, local steel products were the target of 37 anti-dumping lawsuits among 78 trade remedy lawsuits against Vietnamese exports from the outset of the year.