Steel producers complain about high exchange rate, lack of access to capital

The increase of the dollar value against the dong has made steel producers suffer, as they have to pay in dollars to import materials for domestic production. Meanwhile, banks have refused to provide loans to curb the credit growth rate. Both these problems have caused headaches for steel producers.

Commercial banks have urged businesses to pay bank debts in order to reduce outstanding loans.  In order to curb inflation the banks have been told that the credit growth rate must not exceed 30 percent this year.

Local newspaper Dau Tu Chung Khoan reported that in order to pay bank debts a lot of enterprises have had to sell cold rolled steel at a price five percent lower than the import price.

Chairman of Phuoc Tien Production and Trade Corporation (PHT) Nguyen Manh Ha said that banks have stopped the disbursement for projects, which has led to slow steel sales in December.

He said that the sale prices of some kinds of steel used in industries, which are the main products of PHT, are even lower than the world’s prices. As a result PHT does not want to boost sales.

Tran Tuan Duong, General Director of Hoa Phat Group, said that the decisions on raising the basic interest rate from seven to eight percent and adjusting the dong/dollar rate recently have obviously had an impact on import companies.

According to Nguyen Ngoc Anh, Chairman of SMC Investment and Trade, though the more expensive dollar has made steel production costs increase, steel producers dare not raise sale prices sharply.

“While the production cost has increased by five percent, the sale price of finished products has been raised by just three percent,” said Anh

However, the levels of influence of the dollar price increase are different for different businesses. Businesses which have a large inventory of materials they imported before the dollar price increased, would not suffer heavily. Meanwhile, those businesses which have to make products with newly imported materials will be stuck with higher production costs.

Anh admitted that the dollar shortage has eased and businesses have been able to purchase dollars over the last two weeks.

Prior to that businesses could not purchase dollars from banks to meet payments for imports due to the short supply. The dollar supply has been improved after the State Bank of Vietnam promised to sell dollars to commercial banks, while eight commercial banks committed to providing enough dollars to individuals and businesses in need.

Steel producers hope that the current problems will be settled shortly when commercial banks open their doors again to borrowers in the new year. Thus businesses will be able to borrow money to import materials before they go up in price.

VietNamNet/DTCK

Tags: Vietnam steel industry