"Difficulties on top of difficulties", Vietnam's aluminum industry proposes solutions to increase competitiveness

On May 17, in Hanoi, the Vietnam Aluminum Profile Association coordinated with the Office of the Private Economic Development Research Board (Board IV) to organize the Vietnam Aluminum Industry Business Forum 2023.

Overview of the Vietnam Aluminum Industry Business Forum 2023, May 17. (Photo: Van Chi)

The forum aims to connect aluminum producers across the country, provide an overview of the current aluminum industry, identify opportunities and challenges for businesses; consult recommendations from experts, and discuss solutions to limit risks for the Vietnamese aluminum industry and their businesses in the coming time.

"Surrounding" challenges

Speaking at the Forum, Mr. Nguyen Minh Ke - Chairman The Vietnam Aluminum Profile Association said that the current situation of the Vietnamese aluminum industry is extremely difficult. Market demand has decreased sharply, factories are operating at approximately 30% capacity, and cash flow is exhausted. Some domestic enterprises are dumping, causing market disruption. Therefore, it is necessary to have measures to promote a healthy market and increase the competitiveness of Vietnamese aluminum products to find export markets.

“The Association continues to recommend reducing export tax on aluminum bars, rods and shapes; this is the strong product group of Vietnamese aluminum at present,” Mr. Ke suggested.

According to Mr. Ke, in the years 2016-2018, Chinese aluminum had excess production, flooding in to dump, causing domestic aluminum businesses to stop operating and workers to lose their jobs. In 2019, when the Ministry of Industry and Trade imposed anti-dumping taxes on aluminum profiles originating from China, along with the participation of anti-smuggling and anti-trade fraud agencies, it prevented Chinese aluminum from being dumped in Vietnam.

In 2019, Vietnam imposed anti-dumping duties on aluminum profiles originating from China with a provisional tax rate of 2.49% to 35.58%. The decision to impose anti-dumping duties will expire from October 2024, and the deadline for submitting final review documents is September 2023.

"In the period of 2019 - 2020, the imposition of anti-dumping tax on aluminum profiles originating from China was a lifesaver for Vietnamese aluminum enterprises on the brink of bankruptcy and loss of domestic market. Therefore, manufacturers need to review the current situation and agree with the Association to propose the Ministry of Industry and Trade to extend the Decision for another 5 years , " said Mr. Ke.

However, the problem is that after being taxed, Chinese manufacturers have shifted to direct investment in Vietnam to avoid being taxed. The shift in production location also helps Chinese aluminum take advantage of tariff incentives from trade agreements that Vietnamese aluminum enjoys, in order to avoid trade defense measures from countries such as the US, EU, UK, etc.

This also directly affects the domestic market and export market of Vietnamese aluminum factories. Units once again face the risk of losing the domestic market for the second time like in 2018-2019 before the anti-dumping tax was imposed; at the same time, they face the risk of being investigated/imposed with trade defense evasion tax when exporting Vietnamese aluminum to the EU and the US.

Along with the issue of trade defense, Mr. Vu Van Phu - Vice President and General Secretary of the Vietnam Aluminum Profile Association is concerned that the Vietnamese aluminum industry is experiencing excess capacity.

Mr. Vu Van Phu analyzed that the number of aluminum factories is about 100, mainly producing aluminum profiles. Aluminum production capacity has increased sharply, about 1.2 million tons/year, meeting domestic and export demand. In recent years, the capacity of the aluminum industry has begun to be redundant. Output only reached 70% of the design capacity, the amount of goods has far exceeded the demand of the domestic and export markets. In the first quarter of 2023, factories only operated at 30-40% capacity, mainly maintaining jobs for workers, low revenue, and difficult cash flow.

“It is necessary to consider the master plan for the aluminum industry, the production of pure aluminum and the increase of aluminum recycling, and access to 'green' raw materials , ” Mr. Vu Van Phu suggested, and at the same time said that the authorities should consider researching and developing a policy plan for the industry's development; effectively maintain domestic trade defense measures; carefully consider FDI projects in the Vietnamese aluminum industry; reduce export tax on aluminum profiles; increase competitiveness, expand export markets, and overcome the current difficult period.

Depends on raw aluminum

According to Mr. Vu Van Phu - Vice President and General Secretary of the Vietnam Aluminum Profile Association, Vietnam's bauxite-alumina industry has only developed in the past 10 years with the presence of 2 companies under the Vietnam National Coal - Mineral Industries Group. All alumina produced in Vietnam is exported. Vietnam currently does not have the capacity to smelt aluminum, and businesses in the aluminum industry are still completely dependent on imported raw aluminum and scrap to produce aluminum products.

According to the development strategy of the aluminum industry, the first aluminum smelter in Vietnam - Dak Nong Aluminum Smelter, is under construction with a capacity of 450,000 tons/year and is expected to produce the first batch of aluminum using alumina from Nhan Co Aluminum Factory in 2024.

Vietnam's aluminum industry is facing many difficulties. (Source: VnEconomy)

According to the Vietnam Aluminum Profile Association, Vietnam is located in the Asia-Pacific region, representing the largest market and is also predicted to be the fastest growing market in the next 5 years, due to increasing consumption from countries such as China, India and Japan. Mr. Vu Van Phu forecasts the growth rate of Vietnam's aluminum industry in 2023 to reach 7%.

The main products of the aluminum industry are aluminum ingots, aluminum billets, aluminum profiles and industrial aluminum. Aluminum profiles are expected to dominate the market with the driving force being the construction industry.

Besides, Vietnam is the 4th fastest growing construction market in Asia, with big goals for infrastructure and housing, this is the driving force for the industry's development in the next phase.

The important thing is the link

At the Forum, representatives of management agencies and experts shared the same opinion that in the current difficult context, aluminum industry enterprises are facing even more difficulties.

Dr. Tran Dinh Thien acknowledged that in a more complex competitive context, Vietnamese enterprises, including aluminum enterprises, are being exhausted and weakened. The world is shifting while the strength of aluminum enterprises is weak, forcing aluminum enterprises to find ways to cope.

"How to link businesses, reorganize, and what kind of thinking to use to cope with current difficulties and challenges is very important. Is there an aluminum industry strategy yet? And has the aluminum industry strategy, in the sense of the result of gathering business forces, been done by businesses or not, or is it still 'each business on its own'? Each aluminum industry business must link together, reshape its strategy and use that strategy to 'awaken' policies and mechanisms to create opportunities for the aluminum industry to develop," Dr. Tran Dinh Thien recommended.

From the same perspective, according to Mr. Chu Thang Trung - Deputy Director of the Department of Trade Defense (Ministry of Industry and Trade), most new businesses focus on the first and last stages, but miss the middle segment of aluminum smelting due to the high production cost. Therefore, the linkage and value chain of the industry is extremely important.

Regarding the recommendation for competent authorities to effectively maintain domestic trade defense measures, Mr. Chu Thang Trung said that according to the law, each trade defense measure can be maintained for 5 years.

"After this period, we will have to consider and review whether to continue to extend or not. One year before that deadline, the domestic manufacturing industry must submit a proposal to the competent authority requesting a review and effective maintenance of trade defense measures. The competent authority will receive the dossier, review and evaluate it in accordance with regulations. This period will also take at least one year, at which time a decision can be made and recommendations made to the competent authority to consider whether to continue to extend the anti-dumping measure or not.

We cannot decide the extension and anti-dumping tax rate arbitrarily but must rely on data, investigation results of competent authorities and information provided by aluminum industry enterprises," Mr. Chu Thang Trung informed.

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Source: https://baoquocte.vn/kho-chong-kho-nganh-nhom-viet-nam-de-xuat-thao-go-tang-nang-luc-canh-tranh-227426.html