Beginning to take shape in the early 1960s, Vietnam’s steel industry has continuously developed to become of the most important markets in Southeast Asia and gradually improved its position in the world steel market.
According to World Steel, Vietnam has made it to the top 50 largest crude steelmakers in the world, ranking rose 12 levels from 26th to 14th place in 5 years from 2014 to 2019. Besides, the country was one of the four largest steel importers worldwide in 2019 with import volumes of 10.5 million tons.
In Southeast Asia, Vietnam’s finished steel accounted for more than 30% of the region’s output, amounting to 14.5 million MT in 2018. Vietnam also took a leading position among ASEAN countries in the volume of export steel with an increase of 5 million MT in 8 years, reaching 6 million MT in 2018.
In 2019, due to the growing steel protectionism and the downturn of real estate market, the steel industry of Vietnam faced many difficulties. The increase of steel manufacturing sector’s output slumped to the lowest level since 2015, growing 4.4% over the previous year of 2018.
Since the beginning of 2020, the Covid-19 pandemic has negatively impacted on both global and Vietnam’s steel industry. In the first six months, steel production reached more than 13.73 million tons, down 6.9% compared to the same period in 2019, completing 51% forecasted amount of steel production in 2020 according to Vietnam Steel Association. The steel of all kinds’ sales reached nearly 12.4 million tons, presenting a contraction of 9.6% over the same period last year.
However, there was a clear differentiation between the performance of leading companies and the smaller-scale companies in steel industry amid Covid-19. While other businesses are suffering heavy losses in profit margins, market leaders such as Hoa Phat Group, Hoa Sen Group and Nam Kim Steel continue to witness positive growth in the first half of 2020.
Hoa Phat Group’s revenue in the second quarter was at 20,694 billion VND, growing by 35% compared to the same period last year. Revenue from manufacturing and selling steel activities was estimated at 17,353 billion VND, up 49,5% against the same quarter last year. Q2/2020 was also recorded as the most profitable quarter of Hoa Phat in 30 years of development with a profit of 2,756 billion VND.
In the second quarter of 2020 (the third quarter of the fiscal year of Hoa Sen Group), the company earned a gross profit of 6,834 billion VND, increasing by 9.6% compared to the same period of 2019 partly due to the decrease of input materials at the beginning of 2020.
By contrast, VICASA – VNSteel’s Q2 revenue reduced 5.5% to 504.5 billion VND, profit after tax declined 38.5% to 4.8 billion VND. Other joint ventures and associated companies of VNSteel also suffered a total loss of 91.9 billion VND, causing the parent company to reduce their profit after tax in Q2/2020 by 83%, equivalent to 300 billion VND.
Despite its leading position in the construction steel sector, POMINA witnessed negative growth with a loss of 12 billion VND in profit in the first half of 2020. Net revenue of SMC in Q2 decreased by 19% over the same period last year due to the reduction in price of steel products. Viet Nam - Italy Steel continued to post a Q2/2020 loss of 32 billion VND after suffering a staggering loss of 47 billion VND in Q1/2020. Noticeably, Dai Thien Loc Corporation’s revenue in Q1/2020 dropped by 38% over the same quarter last year to 401 billion VND, net loss reached 95 billion VND.
In the short term, Vietnam's steel market is still affected by the impact of the Covid-19 pandemic on consumption demand as well as import and export activities to foreign markets. The industry continues to face great pressure from trade protectionism in the US and other major markets. Steel demand in the Chinese market - Vietnam's largest steel export market, has remained strong, especially since the second quarter of 2020 as construction activities gradually recovered. However, there will be the risk of losing market share when cheap Chinese steel products flood domestic market.
In October, VietnamCredit officially released Vietnam's Steel Industry Report 2020, providing an overview of Vietnam’s macroeconomic situation, data, and insightful analysis about the steel industry. Besides, the report also revealed the top 10 outstanding companies in the industry which were evaluated and selected by VietnamCredit based on their performances in three recent consecutive year (2019, 2018, and 2017), credit ratings, and other non-financial factors.