Vietnam's Ministry of Finance (MoF) has proposed an increase of the most-favored nation (MFN) tariff for imported hot rolled coil (HRC) from the current 0% to 5%, local media reported.
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According to the MoF, there has been concern that the escalation of the US – China trade war could lead to a wave of cheap Chinese steel flooding the Vietnamese market, causing a sharp decline in the steel price in the domestic market.
Uncertainties surrounding the situation have forced Taiwanese-invested steel maker Formosa Ha Tinh Steel (FHS) to reconsider putting plans for a third blast furnace on hold.
Every year, Vietnam imports more than 8 million tons of HRC, of which Chinese products account for 40%.
Without an import tariff in place, cheap Chinese HRC is expected to continue penetrating the Vietnamese market and cause instability to Vietnam’s steel sector, asserted the MoF.
A report from the Vietnam Steel Association (VSA) revealed local steel companies have been able to produce HRC domestically, meeting nearly 50% of local consumption and exports.
The figure is expected to increase to 70% when Hoa Phat Dung Quat iron and steel production complex and FHS’ additional mills start operation.
HRC is a key input material for cold-rolled steel and other pre-painted galvanized steel sheet with import tax rate of 5 – 25%, which is appropriate with tax practice of imposing incremental tax rate from raw material to final product, stated the MoF.
A tariff increase could lead to an increase in the state budget revenue by VND3.15 trillion (US$137.15 million), added the MoF.
However, the MoF asserted exporters could look for input materials from countries having trade agreements with Vietnam, such as China, ASEAN, South Korea to enjoy preferential tariff treatment, indicating a lower than expected revenue.
FHS is the only local steel producer capable of manufacturing HRC with production capacity of six million tons in 2018, according to VSA. But as said earlier, Dung Quat steel plant of Hoa Phat Group is scheduled to be put into operation in 2019, in turn providing an additional of three million tons of HRC to the market, stated KB Securities Vietnam.
