Vietnamese mills oppose steel billet export tax

The Vietnam Steel Association (VSA) has petitioned the government against a proposal to add an export tax on steel billet and cut import taxes for other steel products.

The VSA said in a 19 July letter that it is necessary for Vietnamese steel mills to keep exporting billet to maintain production, particularly when domestic demand is not enough to support production levels.

Vietnam's finance ministry announced a plan on 14 July to add a 5pc export tax on billet in attempt to ease domestic steel prices and guarantee domestic supplies. The plan will also cut import duties on a range of steel products to reduce construction costs.

Vietnam's government has yet not replied to the VSA's petition.

The VSA emphasised that higher steel prices are mainly driven by surging raw material costs with tighter global supplies and demand fundamentals. Vietnamese steel will lose competitiveness in international markets and competition in its domestic market will be fiercer if the proposed import and export tax changes are implemented, the VSA said.

Many market participants do not expect Vietnam will impose an export tax for billet.

"I am doubtful the government would approve the finance ministry's proposal at the moment. The domestic market is very bad now and mills really need exports to get profit," a Vietnamese trader said. "But nobody knows what will happen in the end."

The VSA is representing its member companies to appeal the proposal not to impose an export tax on semi-finished products with HS codes 7206 and 7207, and not to cut import taxes for steel product with HS codes 7213, 7214, 7215, 7216, and 7210.

Steel producers started to cut finished product price from early June in response to weaker Asian steel prices, pulled lower by the Chinese steel market. Domestic demand in Vietnam has been further dented by the monsoon season and a new wave of Covid-19 infections caused by the delta variant. Ho Chi Minh City entered a two-week lockdown from 9 July, with the lockdown measures extended to 1 August as new cases rose sharply.

Vietnam is the main billet supplier to the Chinese market. It exported 1.11mn t of billet to China during January-May, accounting for nearly 30pc of China's billet imports for this period. A 5pc export tax would add around a $35/t extra cost at the latest transaction levels. Some mills have asked buyers to absorb the tax if the government approves the proposal, prompting buyers to turn to other origins.

Vietnamese blast furnace billet yesterday was offered at $690/t fob, or $715-720/t cfr China, while Vietnamese induction furnace billet was offered at $710/t cfr China.