Steel companies are worried about bankruptcy

Risk of Losing at Home

Mr. Thanh states that the initiation of an investigation and imposition of anti-dumping duties on imported hot-rolled steel lacks any legal basis.

Article 78 of Foreign Trade Management Law No. 05/2017/QH14 states that "anti-dumping measures must not be used on imported products with a dumping margin of not more than 2%." The estimated dumping margin for HRC items imported from China to Vietnam is only 1.26%, which does not fulfill the threshold for initiating an anti-dumping inquiry.

According to the Foreign Trade Management Law, the petitioners, who include Hoa Phat Group and Formosa Ha Tinh, must demonstrate the harm done to the domestic HRC production industry before an anti-dumping inquiry into imported HRC can begin. In Vietnam, only Hoa Phat and Formosa Ha Tinh can produce HRC. Thus, Mr. Thanh believes that there would be no negative impact on the local HRC production business because Hoa Phat and Formosa Ha Tinh have both enjoyed strong development in production and sales volumes from 2019 to 2023. Furthermore, Hoa Phat and Formosa Ha Tinh had very high capacity utilization rates of 97% and 73%, respectively, in 2023, with increases compared to the same time in 2022.

Hoa Phat and Formosa Ha Tinh offer HRC to Vietnamese steel sheet and pipe industries at rates 10 - 20 USD/ton more than the import price of HRC, and sometimes 40 - 50 USD/ton more. Importantly, despite selling HRC at extremely high prices, Hoa Phat and Formosa Ha Tinh are continuously short of HRC to sell.

Given Hoa Phat and Formosa Ha Tinh's ongoing expansion in HRC production and sales volumes, as well as their great efficiency in capacity utilization, there is no impact on them.

It should be clarified that HRC is a raw material for producing various finished products, including galvanized steel, cold-coated steel, color-coated steel, steel pipes, structural steel, and other types of steel. If Vietnam imposes anti-dumping duties on imported HRC, the price of imported HRC raw materials will inevitably increase due to the additional anti-dumping duties. Consequently, the prices of finished galvanized steel sheets, steel pipes, and other steel products will all increase accordingly. This severely impacts the competitiveness of Vietnamese galvanized steel and steel pipe manufacturers in both the domestic and export markets.

In the domestic market, if the price of imported hot-rolled steel increases due to anti-dumping duties, the cost of finished galvanized steel and steel pipes produced by Vietnamese companies will also have to increase accordingly. Therefore, they will not be able to compete with imported galvanized steel and steel pipes because the imports use cheaper raw materials, as the governments of other countries do not impose anti-dumping duties on hot-rolled steel. Inevitably, Vietnamese galvanized steel and steel pipe enterprises will lose the domestic market and be defeated at home. If the price of imported HRC increases due to anti-dumping duties and Vietnamese galvanized steel and steel pipe enterprises do not adjust their selling prices accordingly, they will not be able to maintain their profit margins, which are already relatively low, leading to a risk of mass bankruptcy.

Defeated in Foreign Markets

For export markets, Vietnamese galvanized steel and steel pipe enterprises are likely to continue losing. When Vietnam imposes anti-dumping duties on imported hot-rolled steel, the finished products of galvanized steel and steel pipes by Vietnamese companies will have to increase their selling prices accordingly, meaning they have already faced anti-dumping duties once in Vietnam. Later, when these companies export galvanized steel and steel pipes to other countries, such as Canada, they face the risk of anti-dumping duties on the finished products. Thus, the finished products of Vietnamese galvanized steel and steel pipe companies may face anti-dumping duties for the second time in the export market. Consequently, the selling price of Vietnamese galvanized steel and steel pipe products will have to be significantly higher than similar products from other countries, making them non-competitive and losing the export market entirely.

In Vietnam, only Hoa Phat and Formosa Ha Tinh are capable of producing HRC. Vietnamese galvanized steel and steel pipe companies are forced to use HRC from Hoa Phat and Formosa Ha Tinh for export orders to the US, Mexico, etc., to prove the origin and comply with the regulations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Similarly, exports to Qatar, Oman, or Taiwan also require the use of HRC materials produced in Vietnam.

However, the issue is that the HRC supply from Hoa Phat and Formosa Ha Tinh in the domestic market does not meet the domestic demand.

According to the Vietnam Steel Association, the consumption demand for HRC in Vietnam is currently between 10 million and over 13 million tons per year, serving both the production of finished products and the necessary inventory for business operations.

However, the total design capacity of the domestic HRC production industry, including Hoa Phat and Formosa Ha Tinh, is only 8.2 million tons/year. The HRC production by these two companies is sold 50% for export and 50% in the domestic market.

According to the Vietnam Steel Association's report in December 2023, the domestic sales of HRC by Hoa Phat and Formosa Ha Tinh in 2023 reached 3.403 million tons, sold to manufacturers of galvanized steel, colored steel, and steel pipes as raw materials for the next production stage. Thus, the domestic sales volume of HRC by Vietnamese manufacturers can only meet about 30% of the total HRC demand in Vietnam. Since the domestic HRC supply cannot meet the demand, Vietnamese enterprises are forced to import.

Moreover, Hoa Phat and Formosa Ha Tinh do not have enough goods to sell according to each galvanized steel and steel pipe company's demand. Instead, they impose a production quota cap for each company, or in other words, allocate a purchase quota. Companies can only buy HRC within the allocated quota. Therefore, to have enough raw materials for production, galvanized steel and steel pipe companies are forced to import HRC as the domestic supply only meets 30% of the total HRC demand in Vietnam.

Hoping for a Wise Decision from the Authorities

Representatives of the Hoa Sen Group believe that if Vietnam imposes anti-dumping duties on imported HRC, Vietnamese galvanized steel and steel pipe companies will lose both the domestic and export markets, leading to a gradual decline in revenue and profits until bankruptcy, affecting the employment of tens of thousands of workers and the investment of hundreds of thousands of shareholders. The state will lose revenue from corporate income taxes, VAT, and other taxes and fees.

When anti-dumping duties are applied to imported HRC products in Vietnam, the cost of imported HRC will increase by the amount of the anti-dumping duty. Consequently, companies exporting HRC to Vietnam will redirect their exports to other countries that do not impose anti-dumping duties on imported HRC.

When anti-dumping duties are imposed on imported HRC, the price level of both imported and domestic HRC will increase by the amount of the anti-dumping duty. Since Hoa Phat and Formosa Ha Tinh have a monopoly on the HRC supply in Vietnam and the supply is insufficient to meet the demand, these two companies can dictate the selling price and will increase the HRC selling price by an amount equal to or higher than the anti-dumping duty on imported goods. However, it should be noted that Hoa Phat and Formosa Ha Tinh currently enjoy corporate income tax incentives for new investment projects. Thus, the profit margin of these two companies will increase by an amount equal to or higher than the anti-dumping duty on imported HRC, but the state will only collect a small portion of the corporate income tax from the additional profits of Hoa Phat and Formosa Ha Tinh. In other words, the anti-dumping duty on imported HRC will almost entirely translate into additional net profit for these two companies.

Therefore, imposing anti-dumping duties on imported HRC only benefits a small portion of the state while placing the entire burden on consumers and collapsing an entire galvanized steel and steel pipe industry, affecting the livelihoods of tens of thousands of workers and their families. Thus, initiating an anti-dumping investigation against imported HRC requires careful consideration, as it only benefits two specific enterprises.

Additionally, if the Vietnamese galvanized steel and steel pipe industry cannot remain stable, it will have a severe impact on attracting foreign direct investment (FDI) and public investment. First, thick steel, steel pipes, and structural steel are essential components for building factories in industrial zones. When the prices of these products increase, the construction cost of factories will inevitably rise, potentially reducing the attractiveness of FDI. Second, the increase in the prices of thick steel, steel pipes, and structural steel will lead to a corresponding increase in public investment costs, resulting in increased public debt.

Mr. Thanh is concerned that if Vietnam imposes anti-dumping duties on imported HRC, other industries, especially those that make up a significant proportion of Vietnam's export turnover, such as the agriculture, forestry, and fisheries sectors, will face the risk of trade retaliation through the imposition of anti-dumping duties or other trade barriers by trading partners to limit    imports from Vietnam. If this retaliation occurs, millions of workers in various industries in Vietnam will suffer extremely severe consequences.

The remaining galvanized steel and steel pipe companies believe that under the current trade conditions, the state and government are managing the economy very appropriately, and the prices of steel products are operating according to market mechanisms. Therefore, they hope that under the current mechanism, the state will enact suitable policies to facilitate the production and business of enterprises, thereby contributing to the country's GDP growth