The Vietnamese aluminum industry is currently facing significant challenges due to a sharp decline in market demand and the impending expiration of anti-dumping duties. Chinese aluminum manufacturers are redirecting their investments towards production in Vietnam. These challenges require the aluminum industry to adopt solutions for its survival and future growth.
The bauxite-alumina industry in Vietnam has only developed in the last decade with the presence of two companies under the Vietnam National Coal and Mineral Industries Group. All aluminum production in Vietnam is exported, with the US market accounting for 27.7% of the total export value of $2.127 billion.
MAJOR CHALLENGES
According to the Development Strategy for the Aluminum Industry from 2007 to 2015, considering the year 2025 (Decision 167/2007/QD-TTg), Vietnam currently has two electrolysis plants with a capacity of 0.4 million tons per year.
Until now, aluminum smelting has not been successful and has only reached the stage of alumina powder. The Dak Nong aluminum smelter is under construction with a capacity of 450,000 tons per year and is expected to produce its first batch of aluminum using alumina from the Nhan Co aluminum plant in 2024.
The projected growth rate of the Vietnamese aluminum industry is around 7% per year. The main aluminum products in Vietnam are INGOT aluminum ingots (accounting for the largest quantity), followed by BILLET aluminum billets, PROFILE shaped aluminum, and industrial aluminum. Other products, such as household items, aluminum sheets, aluminum foil, and aluminum wire, have very low production volumes.
During the recent “Vietnam Aluminum Industry Business Forum 2023” organized by the Vietnam Aluminum Extrusions Association (VAA) in collaboration with the Private Economic Development Research Office (Office IV), Mr. Vu Van Phu, Deputy Chairman and Secretary-General of VAA, assessed that in the current economic downturn, businesses are facing many difficulties and challenges in maintaining production, ensuring employment for workers, and the aluminum industry is no exception.
Delving deeper into the analysis, Mr. Phu believes that the aluminum industry must confront three major challenges.
- Firstly, there is an issue of excess production capacity. There are currently around 100 aluminum production plants, mainly producing shaped aluminum. Production capacity has increased significantly, reaching over 1.2 million tons per year, meeting domestic and export demand. In recent years, the aluminum industry has experienced excess production capacity. Output only reaches 70% of the designed capacity, and the quantity of goods has far exceeded the domestic and export market demand. In the first quarter of 2023, plants operated at only 30-40% capacity, mainly maintaining employment for workers, with low revenue and difficult cash flow. Meanwhile, some domestic enterprises are engaging in dumping practices, disrupting the market.
- Secondly, there is a trade defense issue. Aluminum imports from China currently dominate the Vietnamese aluminum market. The importation of cheap aluminum from China has affected domestic aluminum production and created intense competition in Vietnam. To protect domestic aluminum production from unfair competition from imported products, Vietnam imposed anti-dumping duties on Chinese aluminum in 2019, with temporary tax rates ranging from 2.49% to 35.58%, valid for 5 years, expiring in October 2024.
- Thirdly, there is a clear trend of capital investment shifting to the Vietnamese aluminum industry. Chinese investors are redirecting their investments to Vietnam due to factors such as lower labor costs, a favorable business environment, and proximity to raw materials.
SOLUTIONS FOR GROWTH AND SUSTAINABILITY
To overcome the challenges faced by the aluminum industry in Vietnam and ensure its growth and sustainability, several solutions can be implemented:
- Diversification of products: Instead of solely focusing on shaped aluminum products, the industry should explore the production of high-value aluminum products such as household items, aluminum sheets, foil, and wire. This diversification can open up new market opportunities and reduce reliance on a single product segment.
- Enhancement of production efficiency: Improving production processes, reducing energy consumption, and optimizing resource utilization can help increase production efficiency and reduce costs. The industry should invest in modern equipment and technologies to enhance productivity and competitiveness.
- Market development and export promotion: The Vietnamese aluminum industry should actively seek new export markets to reduce dependence on a single market. Expanding into emerging markets and diversifying customer base can help mitigate the impact of fluctuations in demand.
- Research and development: Investing in research and development activities can lead to technological advancements and innovation in the aluminum industry. Developing new alloys, improving product quality, and enhancing performance can give Vietnamese aluminum products a competitive edge in the global market.
- Collaboration and cooperation: Strengthening collaboration between industry players, research institutions, and government agencies can foster knowledge sharing, exchange of best practices, and joint initiatives. This can help address common challenges, promote industry development, and create a supportive ecosystem.
- Trade protection measures: Considering the expiration of anti-dumping duties on Chinese aluminum in 2024, it is crucial for the Vietnamese government to assess the situation and take appropriate measures to protect domestic aluminum production. This may involve renewing the anti-dumping duties or implementing other trade protection measures to ensure a level playing field for domestic producers.
- Sustainability and environmental considerations: The aluminum industry should prioritize sustainable practices and environmental protection. This includes adopting energy-efficient technologies, promoting recycling and waste management, and adhering to international environmental standards. Emphasizing sustainability can enhance the industry’s reputation and attract environmentally conscious customers.
CONCLUSION
While the aluminum industry in Vietnam is currently facing challenges, there are viable solutions to overcome them and ensure its growth and sustainability. By diversifying products, enhancing production efficiency, exploring new markets, investing in research and development, fostering collaboration, implementing trade protection measures, and prioritizing sustainability, the industry can position itself for a prosperous future. With the right strategies and concerted efforts, the Vietnamese aluminum industry can navigate through challenges and emerge stronger in the global market.