HCM City (VNA) - The Vietnamese steel industryis expected to face difficulties this year due to an increase in productioncapacity, falling demand and protectionist measures by countries to reduceimports, according to experts.

Last year was a difficult one for steelexporters due to the increase in protectionism, they said.

Exports to the US and the EU markets, the secondand third largest markets for Vietnamese steel, fell by a combined 44 percentin terms of volumes.

Prices too dropped due to falling global demand,causing losses to some construction steel companies.

Many companies have seen profit margins plummet,suffered losses or have cut output.

Domestic consumption was also lower than in2018, with consumption in the first 11 months growing by 3.5 percentyear-on-year compared to 10 percent in 2018.

Entering 2020 with opportunities fromintegration, especially the EU-Vietnam Free Trade Agreement, the steel industryexpects to boost production and export to new markets.

But the US Department of Commerce recentlyimposed import taxes of up to 456 percent on corrosion-resistant steel andcold-rolled steel products using steel of Korean or Taiwanese origin, showingthat protectionism continues and would put pressure on the steel industry.

According to SSI Securities Corporation,domestic consumption is expected to grow at 5-7 percent in 2020 due to theslowdown in the real estate market and public investment.

But the increase in FDI could be a factorsupporting demand.

In 2020 construction steel capacity is expectedto increase by 15 percent, mainly due to the new Hoa Phat Dung Quat ironand steel production complex area and VAS Nghi Son plantwith a capacity of 2 million tonnes and 500,000 tonnes.

In the context of increasing competitivepressure, large companies in the construction steel segment with significantadvantages in production, transportation costs and distribution such as HPGwill hugely benefit.

The galvanised steel sheet segment could be morestable in 2020 because large companies do not plan to expand capacity thisyear.

According to SSI, a slowdown in China's economymight negatively affect steel demand, indirectly affecting steel prices inVietnam.

The Vietnam Steel Association forecasts China’ssteel demand to increase by 1 percent this year, much lower than the estimated7.8 percent growth rate in 2019.

Global demand is estimated to grow at 1.7percent compared to 3.9 percent last year.

Capacity increases amid a demand slowdown,especially for construction steel, would increase the pressure in the domesticmarket, making prices to be volatile, it added./.