Vietnam Overseas

Rolled steel is now in serious shortage as steel mills have halted production due to the rocketing ingot steel price.

The rolled steel price has soared to VND14.5mil/ton; however, one still cannot buy 20-30 tons of rolled steel at once, because the product is now in serious shortage.

In fact, the shortage of rolled steel began in early September 2007, and the situation has become worse as most steel mills have halted production or decreased their output.

At this moment, only Hoa Phat and Viet Han products are available on the market, selling at VND12mil/ton. Meanwhile, Thai Nguyen’s and VIS’ brand names seem to have disappeared from the market.

According to Hoang Van Tong, Deputy Director General of Thai Nguyen Cast Iron and Steel Corporation, the corporation has turned off its 700 ton/day production line, waiting for replacement accessories from Italy. The production line will be put back into operation in October. Meanwhile, the production line at Luu Xa mill has the low capacity of 380-400 tons/day, and only laminates steel when very necessary. The ingot steel made by Thai Nguyen Corporation is more suitable for making bar steel than rolled steel.

According to Le Ngoc Son, Deputy Director General of VIS, the market is lacking rolled steel because enterprises do not like making rolled steel due to low profit. While ingot steel for making rolled steel is just VND100,000/ton lower than that for making bar steel, rolled steel is always VND300,000/ton lower than bar steel.

Mr Son said that VIS churns out several hundreds tons of rolled steel only. The figure is just equivalent to the output of a one-day laminating line operation. This explains why VIS’s rolled steel cannot be seen on the market.

Dinh Van Tam, Director of Viet Han Steel Company, also said that his company was not making rolled steel recently due to low profit. The highest output of the company is 5,000 tons, while the lowest is 3,000.

Mr Tam said that no steel mill wanted to make rolled steel nowadays, since local mills found it impossible to compete with China-made rolled steel. Since mid June 2007, China-sourced rolled steel has been imported in large quantities and sold cheap on the domestic market, thus dominating the market.

However, China later decided to place a tax of 10% on export rolled steel, which made China’s rolled steel more expensive. Meanwhile, local steel mills did not make rolled steel, thus causing the shortage of rolled steel as Vietnam is entering the construction season, when the demand for rolled steel increases.

Analysts have also pointed out that the breakdown at the Phu My Steel Company, which has the capacity of 500,000 tons of ingot steel a year, also has led to the rolled steel shortage.

However, Mr Son believes that the shortage of rolled steel will be eased in the time to come when local mills make rolled steel again. The high price of rolled steel makes production profitable, and this will prompt local mills to go back to production. However, he said that the shortage will last one month more as rolled steel cannot be made overnight.

Meanwhile, Nguyen Van Thong, Deputy Director General of Van Loi Company, is not as optimistic as Mr Son. He said that ingot steel for making rolled steel from domestic sources was limited, while local mills still heavily relied on imported ingot steel. The high ingot steel price will make local mills hesitate to import in large quantities, therefore, the rolled steel shortage will continue.

According to Mr Thong, the ingot steel price has soared to $618/ton, and with the price level, finished steel must be sold at over VND11mil/ton to ensure profit for producers. He said that most local mills did not want to make rolled steel due to the very low profit.

Statistics released by the Vietnam Steel Association VSA showed that 5,639 tons of imported rolled steel arrived in Vietnam in the first 15 days of September. The import price was at $557/ton on average, and it was clear that it would be cheaper to import rolled steel if noting that the ingot steel is now at $618/ton. Therefore, local mills still are considering whether to import ingot steel to laminate steel domestically.

The Ministry of Industry and Trade has sent a dispatch to VSA, requesting its members to maintain production to ensure enough steel for the market and avoid steel shortage. It is clear that the ministry fears that the market will be short of steel when the ingot steel price rockets to $605-610/ton.

Pham Chi Cuong, Chairman of VSA, said that the ingot steel in stock was estimated at 290,000 tons, and the finished steel in stocks at 150,000 tons, enough to sell in October and the first half of November. He said that in order to churn out steel for the coming months, local mills would have to import ingot steel in large quantities, estimated at 250-300,000 tons a month.

Posted VietNamNet Bridge, September 10, 2007, Source: VietNamNet, Tuoi tre

Executives of China’s state-owned enterprises, who have been earning salaries for their work, is expected to become shareholders of their own enterprises.

China will speed up the move to design and issue long and middle-term encouragement policies for executives of central state-owned enterprises, which should be substantial, effective market measures such as shares or options, said Li Rongrong, director of State-owned Assets Supervision and Administration Commission (SASAC) under the State Council, on Friday.

This is the first time for China to raise such a suggestion at the government level to offer shareholdings for managers of 169 central state-owned enterprises as encouragement.

Offering shareholdings for managers will be first practiced in enterprises listed overseas, then in those listed at home and finally in other central state-owned enterprises, an official with the SASAC told Xinhua.

Enterprises first chosen should be those of standard corporate governance and proper management, he said.

According to the official, the revision of the Corporate Law and the issuance of the notice regulating management buyouts by SASAC constitute a legal premise for the establishment of a shareholding encouragement system.

The SASAC, along with the Ministry of Finance, jointly issued the provisional regulation in April this year prohibiting management buyouts of state assets of large state-owned businesses, but allows such transactions at small- and medium-size ones.

The regulation was issued when the reform of changing the split-share structure in China’s capital market has started, the official acknowledged.

There has existed a large volume of non-tradable state and corporate shares in China’s capital market. Before the reform was launched this May, only about one-third of the shares in domestically listed companies are floated on the market, which has been blamed as one of the major causes of China’s sluggish stock markets and putting public investors at a worse position than the actual controllers of the listed companies.

Taking shareholding offer as an encouragement refers to permitting managers to hold certain percentage of increased shares of the enterprises, including those from IPO or refinancing, he said.

“In fact, some enterprises listed overseas have begun such practice. What we are lacking now is just particular measures,” said the official.

However, he added, despite such an encouragement itself being beyond dispute, the biggest obstacle is China’s current environment, such as a share market incapable of objectively reflecting investment value of companies.

As for the percentage of shareholding, the official said that different percentage will be implemented in different companies, but there will be no an upper limit.

Pay for managers of China’s state-owned enterprises has been short of a reasonable standard as some executives managing an enterprises of dozens of billion-dollar capital earns only hundreds of thousands of dollars a year no matter whether the enterprise’s profits are good or not.

In 2003 and 2004, the SASAC has issued provisional regulations for work assessment and pay standards of managers of central state-owned enterprises which links their pay to the assessment results.

In 2004, the first year when the assessment and pay system was performed, 25 large state-owned firms got A, the best level, while 13 enterprises got D or E for failing to reach the goal.

Executives of enterprises getting an A level, will get an annual salary of two or three times more than ever, said Xiong Zhijun, director of Enterprise Distribution Bureau of SASAC.

Source: Xinhua

Economic experts said yesterday the Government should proceed with its initial public offering (IPO) plan for large State-owned companies, rather than holding off until the market heats up again.

Thirty government economic experts and securities company representatives gathered yesterday in a conference on initial public offerings in the Vietnamese stock market, held by the Finance Institute.

“Now that the prices of shares are closer to their real value, new IPOs will be a driving force for the stock market’s growth, as EPOs of large State-owned companies will bring the market good commodities,” said Dang Van Thanh, former deputy chairman of the National Assembly’s Economic Affairs and Budget Committee.

In his opinion, there are many reasons to implement IPOs now.

Thanh said there is still an abundant supply of capital in the economy, even with the 3% cap on stock loans imposed on (joint stock) commercial banks, because State-owned commercial banks can still increase their percentage of stock loans.

Secondly, Thanh said, foreign funds are waiting for investment opportunities and have already expressed their interest in the upcoming IPOs of large equitized companies.

Delaying the IPOs of 20 corporations and nearly 400 enterprises and banks would not, as people expect, bring better results, because the scale of usable capital would not change much, he said.

Finally, Thanh said the fact that the market is not as hot as it could be at the moment does not mean that companies would not still get a good return on their shares, because a company’s performance is a more decisive factor in setting the share price than the market’s performance.

Share prices remaining at a reasonable level will help maintain the stabilization of the market to some extent, Thanh added.

This advantage should not be undervalued, given that the Government’s supreme target is to stabilize the stock market, he said.

Nguyen Minh Phong, Head of the Economics Research Section, under the Ha Noi Institute for Socio-economic Development Studies, said: “Upcoming IPOs will create new investment opportunities. If they are not held in time, capital in the economy will be unproductive or flow to other markets.”

“The Government should continue with its equitization plan as scheduled, otherwise it will lose its prestige, because the plan is a national-level programme.”

“I think that to make equitization more effective, the State should reduce its stake in enterprises which do not need 100% State investment; even companies that the State already has a 51% stake in.”

Thanh said: “Currently, only 13-14% of State-owned enterprises are equitized, and in 50% of equitized companies the State’s stake is 50-51%.”

“This means that the Government is still holding a large amount of capital, which will make it difficult for companies to change their management methods and for the country to restructure its economy.”

According to Thanh, “The equitization of State-owned companies has been planned and this is a major State program. The Government should not hold back on these IPOs if it wants to ensure that all State-owned companies have been converted to limited or joint stock companies by 2009 on schedule”.

He said, at the same time, the Government should not hold rapid-fire IPOs, as a sudden change would probably have a negative effect on the economy.

Tran Dinh Cuong, deputy general director of auditing company Ernst & Young Viet Nam, said companies’ IPOs, especially large ones, are still attractive to investors.

However, the transparency of IPO prospectuses and the level of information disclosure remained as problems that needed to be addressed.

Vietnam Net Bridge, September 25, 2007, Source: Viet Nam News

News of the discovery of a new offshore oilfield in northern Vietnam may be drawing toasts at home, but it threatens to add fuel to a longtime controversy with China over a territorial dispute in the South China Sea.

Just a day after last Wednesday’s announcement of the find by a partnership of oil companies from Vietnam, Malaysia, Singapore and the United States, a Chinese government spokeswoman made clear Beijing’s position toward future oil exploration in the region.

“China is seriously concerned and strongly dissatisfied,” Foreign Ministry spokeswoman Zhang Qiyue said. In contrast, an official with the oil companies called the oil find a “lucky” one for Vietnam.

The oil find, announced by a partnership of companies comprising Petronas Carigali Overseas of Malaysia, American Technology Inc Petroleum (ATI), Singapore Petroleum Co and PetroVietnam’s Petroleum Investment and Development Co (PID), is at the Yen Tu field, about 70 kilometers east of Vietnam’s Hai Phong seaport.

According to ATI general director Dinh Duc Huu, many companies have been exploring Yen Tu for oil and natural gas but this was the “first oil strike” in the waters off northern Vietnam. Huu, who estimated preliminary reserves at 181 million barrels, said most of the country’s daily oil output comes from oilfields off the country’s southern coast.

Vietnam is the is the third-largest oil producer in Southeast Asia with output of 400,000 barrels per day. Indonesia, with crude oil output at 966,465 barrels per day in September, is the region’s No 1 producer, followed by Malaysia.

The partnership, which discovered the oil in the 14,000-square-kilometer area of Blocks 102 and 106 in the Yen Tu field, an area close to Chinese territorial waters, started operations in mid-2000. The companies have spent about US$20 million on exploration and, according to Huu, will need $100 million more over the next two to three years before oil could be removed. Chinese firms earlier had also struck oil in several fields near Block 106.

The latest find is west of China’s Hainan Island and, for Beijing, not too far from the South China Sea, where its territorial claims cover 80% of the area. The South China Sea is also home to the much-disputed Spratly Island chain. Six claimants - China, Vietnam, the Philippines, Brunei, Malaysia and Taiwan - lay claim to part or all of these islands.

At the height of wariness by China’s neighbors about its intentions, this area used to be considered a key security flashpoint in the region, especially when different claimants used different means to strengthen their presence there.

Tensions rose over actions such as Malaysia’s announcement that it would organize tours to the region. In the mid-1990s, the Chinese put up what it called shelters for fishermen on islets claimed by the Philippines, fueling concerns in the Association of Southeast Asian Nations (ASEAN) about increased aggression by China and prompting increased diplomacy to engage Beijing.

China’s reaction this month to the Vietnamese government’s invitation for public bidding in oil exploration in the South China Sea is a reminder that while relations between Beijing and Southeast Asia are much warmer these days, old territorial disputes are very much alive.

This is particularly so for China and Vietnam, whose forces clashed in the South China Sea in 1988 and 1992, and where on both occasions the Chinese emerged victorious.

Beijing has signaled its intent to assert its control over the South China Sea in case oil and gas are found there. China, having already declared the Paracels to be part of its historic waters after seizing the small island chain from Vietnam, now considers them part of its nearby island province of Hainan.

Last year, China and Vietnam agreed to keep the status quo in the region and abide by the Declaration on the Conduct of Parties in the South China Sea, which was signed by China and ASEAN in 2002 after years of refusal by the Chinese to discuss the issue multilaterally. The Southeast Asian grouping considers the document vital to avoiding moves that add to tension in the disputed waters.

Now China is invoking the same document, reflecting its worries that oil exploration involving foreign companies dealing with Vietnam would undercut its claims. China’s spokeswoman Zhang Qiyue urged Hanoi to “correct its wrong conduct” and abide by the consensus reached in the declaration.

“As is known to all, China has indisputable sovereignty over the Nansha Islands and the adjacent waters,” the Chinese official said. “The above action by the Vietnamese side constitutes an infringement upon China’s sovereign rights and maritime rights and interests.”

China calls the Spratly Islands Nansha, while Vietnam calls them Truong Sa. Both countries have fielded historical and archeological evidence to support their claims in the disputed waters.

Zhang Qiyue has asked Vietnam to “cease to adopt any unilateral action that would complicate or give rise to further expansion of the disputes”. She also called on international petroleum companies to “cease to do anything that would impair China’s sovereign rights and maritime rights and interests”. Of late, Vietnam been offering new investment opportunities for foreign crude-oil and gas firms.

At a Hanoi seminar on October 15, PetroVietnam invited foreign companies to Vietnam’s 2004 Licensing Round, which covers nine blocks in Phu Khanh Basin, an area the government said may hold the equivalent of a sixth of the nation’s total oil and natural gas reserves. The deadline for bids was set for next March 31.

“Phu Khanh Basin may contain the equivalent of 5.4 billion barrels of oil, or 16% of the 33.6 billion estimated to lie in Vietnam’s continental shelf,” Tran Duc Chinh, PetroVietnam’s acting general manager for exploration, said in an interview.

The nine blocks, named 122 to 130, cover about 10,000 square kilometers and are 600km northwest of Ho Chi Minh City. According to PetroVietnam chief executive Tran Ngoc Canh, they are at an “early exploration stage”.

But as PetroVietnam vice president Nguyen Fang Lieu remarked: “When oil prices are high, the efficiency of investment increases.” Record-high oil prices of more than $50 a barrel will probably spur interest from oil companies in the Phu Khanh Basin, officials said.

South Korea’s biggest oil refinery has already expressed its interest. Chey Tae-won, chairman of SK Corp, won a pledge by Tran Ngoc Canh to push for joint exploration activities in Vietnam’s offshore oilfields. So far, PetroVietnam has signed 43 contracts with foreign firms to carry out exploration and production operations in shallow-water areas with a depth of less than 200 meters.

Published on 26 Oct 2004 by Asia Times Online/Inter Press Service. Archived on 26 Oct 2004 by Tran Dinh Thanh Lam

Original Article http://www.atimes.com/atimes/Southeast_Asia/FJ27Ae02.html