Vietnam aluminum industry forum - 2023. Photo: N.Linh

Lack of aluminum smelting capacity

Those are the three challenges that domestic aluminum enterprises have to face. This issue was raised at the Vietnam aluminum industry forum 2023 that took place on May 17, organized by the Vietnam Association of Aluminum (VAA) in collaboration with the Private Economic Development Research Board (Board IV).

Vu Van Phu, Vice President and General Secretary of the VAA, said that Vietnam located in the Asia-Pacific region, represents the largest market and is also expected to be the fastest-growing market in the next five years due to increasing consumption from China, India, and Japan. It is forecast that the growth rate of Vietnam's aluminum industry in 2023 would reach 7%.

The main products of Vietnam's aluminum industry are Ingot aluminum, aluminum billet, profiles aluminum, and industrial aluminum. Profiles aluminum is expected to dominate the market with the driving force being the construction industry.

Besides, Vietnam is the 4th growth construction market in Asia, with big targets in infrastructure and housing, this is the driving force for the development of the aluminum industry in the next period.

However, Vietnam currently does not have the ability to smelt aluminum; aluminum businesses are completely dependent on imported aluminum and scrap to produce aluminum products.

Facing the threat of trade remedies

Besides opportunities, the aluminum industry is facing many challenges, especially overcapacity. Currently, there are about 100 aluminum factories mainly producing profiles aluminum. Aluminum production capacity increased sharply, about more than 1.2 million tons/year, fully meeting domestic and export demand.

However, in recent years, the capacity of the aluminum industry has started to be redundant. Output only reaches 70% of the designed capacity, and the quantity of goods has far exceeded the demand of domestic and export markets.

"In the first quarter, factories only operated at 30-40% of capacity, mainly maintaining jobs for workers, low revenue, and difficult cash flow," said Phu.

Meanwhile, according to Phu, aluminum imported from China is accounting for a large proportion of the domestic market. Importing aluminum from China at low prices has affected domestic aluminum production, causing fierce competition in Vietnam.

To protect domestic aluminum production from unfair competition from imported products, Vietnam has imposed anti-dumping duties on Chinese aluminum since 2019 with a temporary tax rate from 2.49% to 35.58%, valid for five years. However, this decision will expire in October 2024, the deadline for submitting the final review dossier is September 2023.

Therefore, according to the VAA, manufacturers need to recognize the role of anti-dumping tax on the domestic market in recent years to make recommendations related to the extension of the decision on the imposition of anti-dumping tax.

In particular, the VAA also raised the current challenge, which is the trend of shifting direct investment capital to Vietnam in recent years, mainly from Chinese aluminum manufacturers. Typically, the Guangdong Xingfa Company redirecting production investment in Vietnam.

According to the VAA, in 2016-2018, Chinese aluminum had an excess of production, spilled into dumping, causing domestic aluminum enterprises to cease operations and workers to lose their jobs. In 2019, when the Ministry of Industry and Trade imposed anti-dumping duties on profiles of aluminum originating from China, along with the intervention of anti-smuggling and trade fraud agencies, Chinese aluminum has been prevented from being dumped into Vietnam.

The problem is that after being imposed tariffs, Chinese manufacturers have redirected their direct investment to Vietnam to avoid tax imposition. Simultaneously, the relocation of production bases can help Chinese aluminum take advantage of tariff preferences from trade agreements that Vietnamese aluminum is currently avoiding trade remedies of countries such as the US, the EU, and the UK. This will directly affect the domestic and export market of Vietnamese aluminum factories.

Therefore, the VAA said that their members once again faced the risk of losing the domestic market for the second time like in 2018-2019 before the anti-dumping tax was imposed; and faced the risk of being investigated and imposed tariffs to evade trade remedies when export aluminum to the EU and the US.