Purchasing power lowest, inventory highest than ever

Most of industries have reported the high level of inventory, saying that the big stocks are the consequence of the high inflation. Experts have also warned that this is the first manifestation of the economic stagnation which needs to be settled as soon as possible.

Goods unsalable

Pham Chi Cuong, Chair of the Vietnam Steel Association (VSA), said that the sales of steel products plummeted in the first six months of the year, because many construction projects have been delayed in the plan to cut down public investments.

The steel sales have been decreasing continuously since March 2011, with the sold steel volume down by 11.4 percent in May and 24.6 percent in June. To date, the stocks have reached 430,000 tons, an increase of 6.9 percent over May, which is reportedly the highest inventory level so far. Meanwhile, every month, enterprises have to pay 300,000-400,000 dong in loan interests for every ton of unsold steel.

Meanwhile, steel manufacturers have been dealt another blow when the Ministry of Finance has submitted to the government the plan to impose 1.5-3 percent tax on steel exports, reasoning that the steel industry consumes too much electricity. Commenting about the proposal, Cuong said that the taxation, if implemented, would block the way out of steel manufacturers, especially when they cannot sell steel products on the domestic.

He went on to say that the electricity price just accounts for 1-1.2 percent of the production cost of laminated steel, while accounting for six percent of the production cost of ingot steel. VSA has proposed not to impose export tax at this difficult moment.

Pham Duc Binh, Deputy Chair of the Vietnam Animal Feed Association, has also complained that the inventory level has been high, since the demand has dropped by 30-40 percent. Even the well known producers, who always have high sales, have also reported the inventory level of 10-20 percent.

Meanwhile, wooden furniture producers have complained that the consumption level has dropped by 30-50 percent due to the low demand, partially caused by the sale price increases of 15-30 percent.

According to Tran Quoc Manh, Deputy Chair of the HCM City Fine Arts and Wood Processing Association, there are two scenarios for wooden furniture manufacturers. In the first scenario, they will incur loss because of the increasing input material prices. Meanwhile, if they do not deliver goods to the partners as contracted, because they do not want to incur loss due to the input material price increases, they will have big stocks.

According to Vu Vinh Phu, Chair of the Hanoi Supermarket Association, the total retailed goods and services in the first six months of 2011 still increased by 22.6 percent over the same period of the last year. However, if not counting on the price increases, the actual growth rate would be 5.7 percent only.

This is really a worrying increase if noting that in 2010, the actual growth rate was higher at 11.2 percent.

The sales have been going very slowly because the purchasing power has been decreasing considerably. Phu said that in 2010, on average, a consumer paid 700,000 dong for his bill, while the figure has dropped to 500,000 dong

Inventory level highest so far

According to Do Thuc, General Director of the General Statistics Office (GSO), the stock index in industrial production in the first five months of 2011 was much higher than that of the previous years. The stock indexes of manufacturing and processing industries increased by 15.9 percent.

The industries which have high inventory levels include brewery production (increased by 94.3 percent), wooden furniture (71.7 percent), non-alcoholic drinks (39.9 percent), animal feed (37.6 percent), fibre (35.4 percent), car and motorbike (30 percent).

“The high stock indexes should be seen as a worrying problem, which shows that the production has been increasing, but the inventory level has been increasing even more sharply,” Thuc said.

“Enterprises cannot sell products to take back capital, while they still have to pay bank loan interests,” he added. – Vietnamnet

Tags: Vietnam electricity, Vietnam energy, Vietnam power shortage