The Ministry of Industry and Trade has proposed that the government continue allowing exports of unprocessed mineral ores, despite the warning from the steel manufacturing industry over a possible raw material shortage.

In the first five months of this year, local mineral companies have been licensed to export more than 3 million tons of minerals, mostly unprocessed ores.

Mining experts have warned that this will not only drain the country’s natural resources, but also drive steel makers to bankruptcy due to a short supply of materials.

On April 12, the Vietnam Steel Association submitted a document to the government calling for a ban over raw material ore exports in order to protect the domestic steel making industry.

The ores should be saved for local production, and a major steel making plant is on the brink of shutdown due to material shortage, the association said.

“Vietnam does not have many reserves of certain ores, including iron, left, so we should be careful in exporting them,” VSA chairman Pham Chi Cuong told Tuoi Tre.

The ores are only washed before they are exported, without undergoing any processing procedures, Cuong added.

In a similar move, Hoa Phat JSC, a steel manufacturer, also called for a halt to raw ore exports, while promising that it is willing to buy all of the processed iron ore at prices equal to or higher than export prices.

Surprisingly enough, in a document recently submitted to the Prime Minister, the industry and trade ministry said exporting unprocessed mineral ores is one solution to assist businesses, and thus should be maintained.

As for the promise of Hoa Phat Co to purchase all of the unsold iron ore, the ministry said it will only approve the proposal should the company meet certain conditions.

“The company must guarantee the purchase to the Prime Minister, and present a detailed buying plan,” the ministry said, adding that this is to prevent the company from asking to buy at lower prices.

Good plan turns bad?

The ministry allowed the export of mineral ore in late December 2012, when the mining industry posted a huge unsold inventory.

Mining companies in 23 provinces and cities were asked to report about their unsold ore so that the ministry would license them to export.

Five months later, on May 6, the ministry reported to the Prime Minister that it had licensed businesses to export some 3.07 million tons of ores.

In fact, many businesses have made false reports about their unsold stock to grab this chance to export more ore, Tuoi Tre discovered.

For instance, mining businesses in Nghe An Province said they had 471,000 tons of unsold mineral ore, an amount much larger than the reserves in the province.

Le Dang Doanh, former head of the Central Institute for Economic Management Research, said allowing businesses to export ore is acceptable when businesses are burdened by unsold stocks.

“But we should consider the issue of how long the incentive should be applied,” said Doanh.

“As most of the ores is exported to China, local businesses are likely to be forced to sell at low prices, which will thus reduce the effectiveness of the ministry’s export plan,” Doanh said.