According to VIRAC’s report, Vietnam’s steel industry in the first six months of the year witnessed a significant decrease in production and consumption of finished steel compared to the same period in 2022. From now to the end of 2023, the prospect of recovery of Vietnam’s steel industry steel industry is still fragile.
Overview of Vietnam’s finished steel industry in the first 6 months of 2023.
Production and consumption of finished steel industry in Vietnam decreased sharply compared to the same period in 2022
Generally for the first 6 months of 2023:
According to VIRAC’s report, in the first 6 months of 2023, sVietnam’s finished steel production reached more than 13 million tons, down about 21% over the same period in 2022. Along with that, the volume of finished steel sold also decreased significantly compared to 2022. Finished steel consumption reached about approx. 12.5 million tons, down about 17% year-on-year in 2022. Although finished steel sales declined, steel exports still saw growth. Finished steel exports in the first 6 months reached 3,881 million tons, up 6.5% over the same period last year.
The reason for the gloomy steel production and consumption is the low demand in the steel market. Domestic demand for steel in the first 6 months of the year decreased due to the freezing of the domestic real estate market. Tight real estate credit policies, difficult corporate bond market, high interest rates, inflation,… are causing many difficulties for the real estate market.
In the export market, although export volume increased, export prices decreased, causing the export value of finished steel products to decrease in general. ASEAN and EU are the two main markets of Vietnamese steel in the first 6 months of the year; with a total market share of about 57% of total steel exports.
Sales structure of finished steel products by type in the first 6 months of 2023
According to VIRAC’s report, in the sales structure of finished steel, construction steel still accounts for the largest proportion and cold rolled steel still accounts for the smallest proportion.
Source: VIRAC’s report
Production and sales of steel of all kinds:
In general, production and sales of construction steel, hot rolled coil, steel pipe, galvanized sheet and non-ferrous metal products in the first 6 months of 2023 all decreased sharply compared to the same period in 2022.
- Production and sales of construction steel in the first 6 months of 2023 both decreased sharply compared to the same period last year. The reason for this is that domestic demand is weak, so factories have to compete continuously and gradually reduce output. Although the units have adjusted the selling price of construction steel with reductions of 100-200 VND/kg depending on the product type, the market’s consumption is still very weak.
Source: VIRAC’s report
- Cold rolled steel dropped quite deeply in both production and sales compared to other commodities. The reason for this may be that cold rolled steel mainly serves the domestic market, and export output of cold rolled steel is not large.
Source: VIRAC’s report
Business results of leading enterprises in Vietnam’s steel industry 2023:
In terms of the latest steel industry market share, the 3 enterprises with the largest steel market share in Vietnam are: Vietnam Steel Corporation (Vnsteel) holding the largest market share with 23.16%, followed by Hoa Phat Group in the year 20.27% market share, Pomina Steel Joint Stock Company (Pomina) 11.63%.
– Business results of Vietnam Steel Corporation (VNSTEEL):
According to the aggregate report, in 6 months, net revenue of Vietnam Steel Company (VNSTEEL) decreased by nearly 31% over the same period, to 15,096 billion dong. Net revenue was not enough to cover expenses, so VNSTEEL posted an after-tax loss of 216 billion dong in the first 6 months of 2023. Although in the same period last year, VNSTEEL still reported a profit of 155 billion dong.
– Business results of Hoa Phat Group:
According to the aggregate report, in the first 6 months of the year, Hoa Phat recorded VND 56,085 billion in net revenue and more than VND 1,831 billion in profit after tax. Thus, net revenue and profit after tax of Hoa Phat decreased by 31% and 85% respectively over the same period last year. Thus, after the first half of the year, the company has fulfilled 37% of the revenue target and 23% of the full year profit target. With the current situation of the steel industry, it will be difficult for Hoa Phat to achieve the profit target of 2023.
– Business results of POMINA Steel Company:
According to the aggregate report, in the first 6 months of 2023, Pomina’s revenue decreased by 70% over the same period, reaching more than 2,400 billion VND; net loss of 537 billion dong. Although before that, in the first half of 2022, this business still made a profit after tax of more than 8 billion dong.
It can be seen that the difficulties of the steel industry in the first 6 months of 2023 are clearly reflected in the business situation of the leading enterprises in the steel industry. Among the top 3 enterprises, only Hoa Phat reported profit.
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Outlook for Vietnam’s steel industry at the end of 2023
The prospect for Vietnamese steel enterprises at the end of 2023 is still quite vague due to:
Demand for the steel industry is still limited:
It can be seen that, from the beginning of 2023, the market of Vietnam real estate is very gloomy and this situation may last until the end of the year. Construction steel accounts for the largest proportion in the consumption of steel industry, the real estate construction market in Vietnam accounts for 60% of steel demand.
Meanwhile, the real estate market in Vietnam is facing many difficulties. Access to new capital, legal risks when trading and building real estate are still present. Currently, the number of construction projects underway in the South is lower than the previous period Covid-19. The number of newly licensed construction projects in 2022 is also a record low, indicating a very weak construction demand in 2023.
According to VIRAC’s report, construction area growth in Vietnam is forecasted to decelerate in 2023, with a growth rate of about 2.4%, equivalent to a low growth rate in 2020 when Covid-19 occurs, mainly in from a decline in the residential construction group, which accounts for two-thirds of the industry’s output.
The export demand of Vietnam’s steel industry is also forecast to decrease due to the opening of the Chinese market. China’s steel has long been a competitor of Vietnamese steel in the international market. With the opening of the market and stable production situation, China is looking to boost steel exports by lowering product prices. This causes high competition for Vietnam’s steel industry in the international market.
Steel industry production costs increase: forecast to increase
The price of electricity produced may increase, putting significant pressure on product costs. The production of steel products has high electricity costs. This will create a big obstacle for the Vietnamese steel industry when the cost of steel production is pushed up while the market demand is already not very positive.
Besides, the prices of other input materials are still volatile. In 2023 and 2024 iron ore prices are forecast to reach 90 and 70 USD/Ton (DISR) with the expectation of recovering export supply in Australia and recovering production in China. A raw material in steel production – coal is also forecast to increase. Coal prices are expected to recover in the context of India increasing imports of coal for steel production. Coal is forecasted to trade at $187.94/ton – $213.9/ton in the near future.
However, the steel industry still has some signals for recovery:
Public investment is forecast to recover, which is a very positive signal for the steel industry. In 2022, disbursement of public investment is behind schedule because of strong fluctuations in material prices and time-consuming disbursement procedures due to the Covid-19 epidemic prevention rules.
Therefore, in 2023, public investment will be boosted by (1) the government disbursing backlog projects from previous years, and (2) the additional economic stimulus package worth 350 trillion VND of the Government. government.
In addition, a series of public investment projects such as North-South Expressway, North-South Expressways, Eastern, Western and Southeast coastal highways, key economic zones, Long An airport, Ring Road in two economic centers Hanoi and Ho Chi Minh… will also be deployed from now until the end of 2023. This is a sign that demand for steel may increase.
However, the share of steel in public investment is not much. Therefore, the contribution of the recovery of public investment is still not really significant. It is estimated that total construction steel consumption in 2023 will decrease by about 4% before recovering strongly by 7% in 2024. The driving force for growth will largely come from the recovery of the civil construction market.
The above information is summarized in “Steel Industry Report Q2/2023“. The report not only provides full information on macroeconomics, trade supply and demand of the steel industry in general, but also provides full information on specific products of the steel industry such as construction steel, pipes. steel, hot rolled steel, cold rolled steel, galvanized steel and non-ferrous metal products. In addition, the report also contains relevant information and forecasts about the steel industry from the latest updated data.
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