China resumes import of scrap steel, is Vietnamese steel worried?

	Chinese applied series of imported goods control measures for Covid-19 prevention
	Vietnam, China continuously develop comprehensive strategic cooperative partnership
	Vietnam becomes sixth largest trading partner of China

Compared to 2019, the production of steel of all kinds in 2020 will reach more than 25.9 million tons, an increase of 2.7%; steel sales of all kinds reached more than 23.4 million tons, up by1.4%. Photo: Nguyen Thanh

For Vietnam, electric arc furnaces are expected to be disadvantageous and blast furnaces will benefit more from this policy.

Accelerate at the end of 2020

According to a recent assessment from the Vietnam Steel Association (VSA), before Vietnam controlled the Covid-19 pandemic in 2020, the implementation of Free Trade Agreements (FTAs) such as the EU-Vietnam Free Trade Agreement (EVFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) created momentum for sectors of the economy to recover in the new normal state.

As a result, steel production of all kinds in 2020 will reach more than 25.9 million tons, an increase of 2.7% compared to 2019; steel sales of all kinds reached more than 23.4 million tons, up by 1.4%. Ofwhich, steel export of all kinds reached over 4.5 million tons, down slightly by 0.7%.

Notably, in December 2020, steel production of all kinds reached 2.6 million tons, an increase of 6.7% compared to November 2020 and an increase of 15.9% compared to the same period in 2019.

Sales of steel of all kinds reached 2.4 million tons, down by 1.02% compared to November 2020, but up by 21.2% compared to the same period in 2019. Ofwhich, steel exports reached more than 447,700tons, downby 6.45% compared to the previous month, but upby 24.4% compared to the same period in December 2019.

According to the VSA representative, steel demand in China is recovering strongly due to the return of construction industry and recovery of industrial production.

In the domestic market, with a GDP growth target of about 6-7%, the steel industry expects this to be a stepping stone for domestic steel consumption growth.

However, the VSA also expressed concern onsome risks related to protectionism as countries increase the application of trade remedies.

Blast furnace, electric arc furnace disadvantage

According to the VSA, since the end of November 2020, the price of steel production materials such as iron ore and scrap steel has increased abnormally and set a record price in the last three years. At the beginning of January 2021, the price of scrap steel imported at Dong A port was US$475 per ton. This price increased US$95 per ton compared to the beginning of December 2020. Scrap prices offered for sale in the East Asian markets tended to increase sharply, the Europe and America tended to remain unchanged.

Regarding steel production and import and export, from January 2021, China lifted the ban on scrap steel imports that was issued two years ago. At the same time, China also reduced import tax on scrap steel for steel re-production to zero.

Mr. Nguyen Van Dai, Deputy General Director of Business Ton Dong A Joint Stock Company, said that from August 2019, China's import of scrap steel was almost zero because of the policy of banning the import of scrap steel to produce steel export to protect the environment. However, from January 2021, China changed its policy and allowed scrap steel imports, leading to an increase in the demand for scrap steel materials this year. Currently, a number of companies have started to take advantage of them to import.

"Electric arc furnace companies may be affected by China's scrap import policy," Mr. Dai said.

Ms. Nguyen Khanh Nghiem, representative of CRU Singapore market research company, said that the fact that China started to import scrap steel could cause the price of this item to change. If this country increases scrap steel imports but maintains imports of finished steel products, the global scrap steel price will increase. In case China increases the import of scrap but reduces the import of finished products, the situation will not change much.

Regardingthe new move of China to re-import scrap steel, Mr. Nguyen DinhPhuc, General Director of Vietnam Steel Corporation, said this has a great impact on the price of scrap steel on the world market. With the current trend, blast furnaces will be more profitable and electric arc furnaces will be at a disadvantage in 2021.

Talking to a reporter fromCustoms News, an expert in the steel industry said that electric arc furnaces use scrap steel as raw material for finished steel production, so the move to import scrap steel from China could push up the scrap price. However, if the scrap steel market as well as finished products go up together, the Vietnamese steel enterprises will not be affected much, they can still balance input-output to make profits.