A Vietnamese steelmaker recently expressed that its business could soon be hurt by an influx of cheap Chinese steel, as Chinese steelmakers try to dump excess capacity overseas.
As China has been trying to reduce its steel capacity, it is looking into overseas markets to buy its steel products due to weak demand at home as a result of the economic slowdown. The downturn has been exacerbated by the effects of the ongoing Sino-U.S. trade war.
Vietnam is one of these overseas markets targeted by China since the country is Southeast Asia’s biggest steel consumer.
FHS currently has two blast furnaces, which involves the process of smelting iron ore to produce crude iron, allowing the company to produce 7.1 million tons of crude steel per year. The planned construction of the third blast furnace would push its production capacity to 22.5 million tons per year.
“We will carefully examine the plan as uncertainties are growing over the outlook of the U.S.-China trade war,” said FHS Chairman Chen Yuan-cheng in an interview with Nikkei.
He added that the final decision about the third furnace could be made by the end of the year after talking with the company’s three main shareholders and the Vietnamese government.
FHS’s biggest shareholder is Taiwanese plastics manufacturer Formosa Plastic, with over 70 percent shares, followed by Taiwan Steel with 20 percent, and Japanese JFE Steel with 4 percent.
Contrary to the slowing Chinese economy, Vietnam’s economy has enjoyed strong growth in recent years, with average GDP (gross domestic product) growth of 6 to 7 percent. At the same time, the country’s steel consumption has increased from over 10 million tons in 2013 to over 22 million in 2018.
Currently, steel imports coming into the U.S. market face 25 percent tariffs, which was put in place by the Trump administration in March last year. There are a handful of exempted countries: Argentina, Australia, Brazil, Canada, Mexico, and South Korea.
That year, the top ten steel exporters to the U.S. market were Canada, Mexico, Brazil, Taiwan, and Vietnam. China did not make the top ten.
Over the same timeframe, Chinese exports to the United States fell by 13 percent.
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