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HO CHI MINH CITY. – Vietnam, which used to import some of its steel requirements from the Philippines, is now exporting to its former supplier. And in the near future, Vietnam is determined to become a major exporter of steel products not only to the region but also to the global market.

Le The Binh, senior manager of Sumitomo Corp. Vietnam LLC, said a combination of factors is firing up the steel industry in Vietnam, something from which the Philippines can learn.

Binh said there have been no new investments in the Philippines for a while. The last major investor, India’s Global Steel, has run into problems at its Iligan City facilities, raising concerns over its ability to supply local downstream manufacturers.

"The Philippines has enough mills (and the capacity) is enough for the market," Binh said.

This could be the reason the Philippines has not seen new investments in steel.

Vietnam, in contrast, has been attracting big global players. Locals are also putting their money into mini mills, raising capital through the stock market.

Binh said just three years ago, Vietnam was buying pre-painted, coated steel and galvanized iron sheets from SteelCorp. Today, it is exporting the same products and some pipes to the Philippines.

Although Vietnam still imports more than it exports, the magnitude of investments it has been attracting would make this tiny socialist country a major exporter of steel products in a few years.

"The market has changed. In the near future, Vietnam will be a strong exporter of coated steel and pipes," Binh said. Vietnam used to import such products from Russia, UkRaine, China and North America.

Consider the following: Posco of Korea is putting $1 billion into a facility for cold rolled coils (CRC). It is then set to expand into to hot rolled coils (HRC) for export.

China Steel Corp., Taiwan’s biggest, is similarly investing $1 billion for CRC production.

Japanese firms like Sumitomo Metals Inc, as well as Nippon Steel, are also betting on Vietnam. "They choose Vietnam because the market is still big," Binh said.

This, along with government incentives like tax exemptions, makes Vietnam attractive for steel investments.

"As a policy, Vietnam can increase its tariff. Government is quick to act and raises duties right away to protect local players," Binh said.

Duty on CRC is at 8 percent because there are many local mills. Duties on coated, prepainted GI sheets are at 15 percent.

HRC duty is at zero because there is no local production to speak of, but Binh said government will surely gradually increase this to 5 percent then 10 percent when some of the plants come onstream.

According to Binh, Vietnam’s exports have increased 20 to 30 percent over two to three year. Markets for its coated steel and pipes include Cambodia, South Asia, Middle East and even the United States.

"Vietnam’s (steel industry) developed fast because its locals invested," Binh said, adding that this early, there is excess capacity for some products that can be exported.

Investments in steel are seen growing further despite the Vietnamese government’s decision to tighten entry of players by requiring licensing of projects.

Some of the steel investments in 2009 went to Sumitomo’s $1 billion project and Formosa’s $4 billion steel complex.

Tata Steel is making a few billion dollars worth of investments in an integrated steel project and is in discussion with the Vietnamese government for special tax incentives.

In an industry update, steel consumption in Vietnam is projected to grow 12 to 20 percent this year.

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