Glass and steel producers threatening to raise prices following fuel price hike

Glass and steel producers are warning that the mazut price increase will make production costs higher and force them to raise prices.

Petrolimex has decided to raise the mazut, a fuel oil, price by 400 dong per kilogram from January 4, 2010. Following the decision, the sale price in zone 1 is now 13,200 dong per kilo for 3S and 13,000 dong for 3.5S products.

Deputy general director of Petrolimex Vuong Thai Dung said theworld mazut price has been staying consistently high for the last 30 days, leading to the loss of 600 dong per kilo to Petrolimex. As such, the 400 dong per kilo price increase is still not big enough to ensure profits for the company.

The Military Petroleum Corporation (MPC) has not raised the mazut price yet, saying that it is still selling product imported before at the previously lower price. However, MPC director Vuong Dinh Dung said his company would have to raise the sale price soon when it starts selling the product imported at new prices.

“The mazut price increase will make the production cost of every tonne of steel increase by 20,000 dong at least,” said Pham Chi Cuong, chairman of the Steel Association, adding that it takes 50 kilos of mazut to make one tonne of steel.

Besides, Cuong has warned that transport fees will also increase because of mazut price increases, A large proportion of finished steel products are carried by ships and vehicles which run on mazut.

In principle, producers will raise sale prices when raw material prices increase. However, producers have to compete with low cost imports on the domestic market.

According to Cuong, the price of construction steel risen by 10 percent over the previous month, selling at 12 million dong per tonne on January 4. However, the steel price is likely to increase further, not only because of the mazut price increase, but also because of the electricity price increase from March 1.

Tran Quoc Thai, chairman of the Construction Glass Association, also said that glass producers will have to raise sale prices, because mazut accounts for 40 percent of the production cost of glass products.

If domestic producers have to raise sale prices, they will face difficulties as illegally imported glass products are very cheap, selling at just 30-40 percent of the production costs of Vietnamese companies.

Domestic glass producers have called on the government to apply safeguard measures against import glass products, and reduce VAT and lower mazut prices.

According to the glass association, the mazut price in Vietnam is now higher by 20-30 percent than the price in regional countries.

VietNamNet/TBKTVN

Tags: Vietnam steel industry