HANOI: There are tens of steel mills operating now in Vietnam that make steel from iron ore. However, most of them are small scale. Only TISCO Steel and Hoa Phat Group have large-scale mills. Of these two big manufacturers, TISCO has its material sources, while Hoa Phat has to buy iron ore from domestic sources.
As such, according to analysts, the policy on prohibiting iron ore export, applied since 2012, has been only benefiting Hoa Phat. Meanwhile, iron ore companies have suffered heavily, while other steel manufacturers don’t get any benefits from the ban.
A document of the Iron Ore Exploiters’ Association sent to the Prime Minister in 2015 showed that 90 percent of enterprises were bankrupt, while the remaining 10 percent have been running at moderate level. Since the government prohibits the iron ore export, ore exploiters cannot sell their products. Hoa Phat Group proves to be the only big buyer which has been trying to force the prices down.
It is estimated that every 1.6 tons of iron ore (65 percent Fe) can churn out one ton of steel. This means that the value of iron ore in every one ton of steel is just VND1.85 million. Meanwhile, they can sell steel at VND12 million per ton. This means that domestic steel companies can buy iron ore cheaply while they can sell steel at high prices.
An independent research work conducted by FETP’s experts Huynh The Du, Do Thien Anh Tuan, Nguyen Xuan Thanh and Dinh Cong Khai showed that the iron ore export band brings advantages to the enterprises which utilize blast furnace technology such as TISCO and Hoa Phat.
The researchers have also pointed out that the policy brings benefits to Chinese products, while China is the biggest direct rival for Vietnamese manufacturers. The illegal export of oil has led to the loss of revenue for the state budget, while it has created an u level playing field for enterprises.
According to Vietnam’s customs agencies, Vietnam exported 1.24 million tons of iron ore in 2013. Meanwhile, the figure reported by China’s customs agencies was 4.5 million tons. The gap was due to unofficial exports. Bui Trinh, a renowned economist, commented that the policies which only can bring benefits to one or two enterprises will harm the economic environment. Experts commented that it would be better not to prohibit the ore export, especially when many steel mills in the world now tend to make steel from scrap steel instead of ore to avoid pollution.
