Vietnam is looking to extend its import safeguard duties on billet and longs steel as the March 21 expiry nears, regional sources said.

Its Ministry of Industry and Trade is running an investigation for the extension of the safeguard duties, according to an official notice seen by S&P Global Platts. This had however, left the market divided into two camps -- one for the extension and the other against.

The safeguard duties were introduced in March 2016, Platts reported previously.

Vietnam's initial safeguard duties on billet and longs steel imports were imposed at 23.3% and 14.2%, respectively, with a gradual, periodic decline to the current rate of 17.3% and 10.9%, expiring on March 21.

The duties initially allowed the Vietnamese steel industry to thrive and flourish within a protected environment, but some market participants now deem the duties a double-edged sword, limiting the competitiveness of electric arc furnaces against the dominant blast furnace steelmakers in the country.

“The previous inclusion [June 2019] of Kazakhstani and Malaysian billet into the safeguard list has handicapped some of the mills here, who were taking advantage of the lower billet prices [in comparison to scrap melting margins],” a northern Vietnamese mill source said.

“Unfortunately, we have no choice, but to either buy local billets from the blast furnace steelmakers here, or to succumb to scrap melting, which brings about higher costs.”

The growth in Vietnamese steel capacity since 2016 was regarded as the “bright spark” in Southeast Asia, as steelmakers started expanding or injecting new furnaces amid a protected import environment. In addition, demand for raw materials surged as production expanded.

Vietnamese crude steel production grew nearly three folds over 2016-2019, with total output at 20.1 million mt in 2019, according to data from Worldsteel Association. Vietnam's ferrous scrap imports in 2019 gained nearly 43% over the same period, to 5.58 million mt, latest preliminary customs figures showed.