THE IRON AND STEEL INDUSTRY RECOVERS AND MOVING TOWARD SUSTAINABLE GROWTH
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The low global iron ore prices are bringing many positive impacts to our country's economy. Alongside economic development, the steel industry also needs to consider sustainable development.
Iron ore prices have rebounded in recent trading sessions after two consecutive weeks of decline. According to the Vietnam Commodity Exchange (MXV), at the end of the session on July 12, iron ore prices increased by 3% to $108.93 per ton. However, iron prices are still about 16% lower than the recent peak reached in March.
Iron ore prices are under pressure due to slow global economic growth, leading to weakened demand for steel. Additionally, production costs, especially transportation costs for steel, have decreased significantly compared to the previous period. The Baltic Dry Index (BDI Index), which reflects the daily cost of chartering vessels for commodities such as iron ore, coal, cement, has decreased by more than 50% to 1032 points.
The decrease in iron prices creates favorable conditions for Vietnam.
In Vietnam, despite facing many challenges, our country's economy still has its own bright spots. Specifically, to support businesses and individuals in accessing capital for production and business purposes, the State Bank of Vietnam (SBV) has continuously lowered interest rates for the fourth consecutive time.
The reduction in credit costs will support domestic steel manufacturing and business enterprises, contributing to improved pre-tax profits. The Vietnamese government has also taken resolute actions to address difficulties faced by businesses. Recently, the Prime Minister has urged the SBV and commercial banks to continue researching and adjusting favorable lending conditions, reducing costs to lower interest rates.
However, the potential for further interest rate reduction by the SBV and commercial banks is limited. Therefore, in addition to monetary policy, fiscal policy is expected to remain a pillar of economic growth for our country this year, especially in the field of public investment.
According to the Ministry of Finance, the disbursement of public investment capital in the first six months of 2023 is estimated at 215,578.9 billion Vietnamese dong, equivalent to 30.49% of the Prime Minister's assigned plan. In June 2023 alone, the disbursement rate of public investment capital increased by over 8%, more than double the average disbursement rate in the previous months of 2023.
According to Mr. Pham Quang Anh, Director of the MXV News Center, steel is an important raw material for construction and infrastructure projects. Therefore, maintaining steel prices at a reasonable level as it is now will help alleviate cost pressures for businesses. Moreover, the growth of infrastructure and public investment activities will contribute to solving output issues and create favorable conditions for the domestic steel industry to grow.
The decrease in steel prices will also help alleviate inflation pressures on the housing and construction materials sector. According to the General Statistics Office, in June, the index of housing and construction materials increased by only 0.07% compared to May. The impacts from increased electricity prices have been offset by the decline in iron ore prices.
The iron and steel industry faces the challenge of "greening."
In addition to financial goals, implementing sustainable development and protecting the environment is also an essential issue for our country's economy in general and the steel industry in particular, especially since Vietnam has committed to achieving a Net Zero emission level by 2050.
Deputy Prime Minister Tran Hong Ha also emphasized that environmental protection should take the lead as the foundation for harmonious economic development with nature. Planning must have a vision and mindset to facilitate the development of economic sectors while preventing and mitigating negative impacts on the environment.
According to the International Energy Agency (IEA), in the past decade, total CO2 emissions from the steel industry have increased, primarily due to increased steel demand. Direct CO2 intensity from the production of crude steel has decreased slightly in recent years, but efforts need to be accelerated to meet the net-zero emission trajectory of the industry by 2050.
Many major steel-producing countries such as China and India have also focused on improving technologies and increasing steel scrap recycling to minimize environmental impacts.
According to the IEA, the steel industry can achieve short-term CO2 emissions reductions primarily through improving energy efficiency and enhancing scrap collection to enable more scrap-based production. However, the technical potential for energy efficiency improvement is limited, and the supply of steel scrap is finite. Therefore, reducing emissions intensity will require the application of new technologies such as electricity-based production, hydrogen gas, and carbon capture, utilization, and storage (CCUS) processes.
The greening process of the steel industry is a challenging yet crucial endeavor for Vietnam to achieve sustainable development, as evaluated by Mr. Pham Quang Anh.
Introducing Ton Nam Kim - Nam Kim Steel:
Ton Nam Kim - Nam Kim Steel is a leading manufacturer and supplier of galvanized steel in Vietnam. They play a significant role in providing high-quality galvanized steel products, contributing to the country's sustainable growth and environmental protection efforts.
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