Steel association objects to 3% tax on steel export

The Vietnam Steel Association on Monday voiced its objection to the Ministry of Finance’s plan to slap a 3% tariff on several kinds of steel products for export including ingots, saying the tariff would hurt the industry currently facing oversupply.

In a petition submitted to the Government and related ministries, the association said the steel industry should be encouraged to boost export because its trade gap remained very high and the local output far exceeded domestic demand. So far, all of steel products and ingot are enjoying a tax exemption for export, according to the steel association.

Pham Chi Cuong, chairman of the association, said that the country last year spent some US$7.1 billion to import steel products and materials, while it exported only some 1.4 million tons worth some US$1.1 billion, resulting in a trade gap of US$6 billion for the steel industry.

The Finance Ministry has suggested the new export tariff in an apparent move to limit local production and thus to ease pressure on the electricity industry, as steel manufacturing consumes much energy.

According to the Finance Ministry, steel enterprises are taking full advantage from the low power price to produce steel for exports.

Cuong of the association said in the document that was sent to the Government on Monday that the power price made up a very modest part in the total cost of steel and ingot production.

He said it needed some 600 kilowatt-hours of power for producing a ton of ingot and between 100kWh and 200kWh to produce one ton of steel products from ingots.

Given the power price at about VND1,242 per kWh, steel makers have to pay a power cost of some VND745,000 to make one ton of ingot, meaning the power price occupies only some 5.1% in the total cost of ingot production.

The power cost makes up between 0.7% and 1.1% in the production of construction steel.

“The power price makes up a very modest proportion in the total cost of steel products, so we could not conclude that the steel industry is enjoying much benefit from the low power price,” the chairman of the association said in the document.

Currently, annual local steel output is comprised of 5.7 million tons of ingots, 8.9 million tons of construction steel, 1.9 million tons of steel pipes, 1.8 million tons of plated sheets, and 2.7 million tons of cold-rolled steel.

The consumption of steel products in the country has been fluctuating between 34% and 75% of the total production capacity of the steel industry.

Therefore, the association said that the increase of tax on exported steel and ingot will cause bad impacts on local steel enterprises and as a result, the higher tax will result in a swelling stockpile. – SGT

Tags: Vietnam steel exports, Vietnam steel industry, Vietnam steel market