Hoa Phat Group, the leading company in Vietnam’s steel industry, reported a loss for the first time in 13 years. The company recorded a negative profit after tax of 1,786 billion VND in the third quarter of 2022. This quarter is also the third consecutive quarter that sees Hoa Phat’s revenue declining. Their revenue was down 12% over the same period in 2021 and about 8% compared to the second quarter.
Another big name in Vietnam’s steel industry, Nam Kim Steel, reported a loss of 400 billion VND. Its revenue was down 1.7 times compared to the same period in 2021. That is the record negative profit of this business since the announcement in the first quarter of 2010.
Similarly, Hoa Sen Group (HSG) lost about 887 billion VND in the last quarter of the 2021-2022 fiscal year. In the previous period, they reported a profit of more than 940 billion VND. Hoa Sen announced a negative profit for the first time since the fourth quarter of the 2017-2018 fiscal year.
The members of Vietnam Steel Corporation (VNSteel) also reported record losses or only small profits. Profit after tax of Thu Duc Steel (TDS) was negative 22 billion VND.
A similar amount of losses also occurred at Vicasa Steel (VCA), while during the same period in 2021, the company still made a profit of about 2 billion VND. That became Vicasa's highest loss since the third quarter of 2020.
Other companies, such as Thai Nguyen Iron and Steel Joint Stock Corporation (TIS), and Ho Chi Minh City Metal Corporation (HMC), converted from profit in the same period to a loss of 25 billion VND and 12 billion VND, respectively. These were the lowest profit of the two businesses in many years. Among the members of VnSteel, only Me Lin Steel (MEL) and Cao Bang Steel (CBI) were able to keep positive profits but at deficient levels, down 95% and 99%, respectively.
Not only steel-producing companies, but steel distributors and traders also suffer negative business results. SMC Trading Investment Joint Stock Company lost nearly 220 billion VND in the third quarter of 2022. In the same period in 2021, they earned about 130 billion VND. The loss of SMC in the third quarter is the highest since it started to disclose information in the fourth quarter of 2004.
The losses of Vietnam’s steel companies have been anticipated for some time, with many companies having predicted a bad scenario. Steel companies cited low domestic consumption and exports, rapid prices drop, and high inventories as the reasons for their drastic profit decline.
According to Vicasa's leader, Vietnam’s steel industry is affected by the Russia-Ukraine conflict, China's "Zero Covid" policy, and global inflation. At the same time, high input costs also put heavy pressure on them.
Besides, banks tightening credit room for real estate also reduces the steel demand. In addition, some companies are also under pressure from high borrowing rates and exchange rate differences.
Thanks to consecutive peaks in steel selling prices, Vietnam's steel industry had several burgeoning months in 2022. However, steel profits gradually receded when the prices deteriorated. From mid-May to the end of August, steel has 15 continuous price reductions from around 19 million VND a ton to 14.5-15 million VND. Although there was a slight increase at the beginning of September, the steel price decreased 2 times in a row to about 14 million VND a ton, equivalent to the end of 2020.
Vietcombank Securities’ outlook for the steel industry in the remainder of the year is gloomy. This firm predicts that Chinese steel prices will maintain the current low level in the second half of 2022. Steel demand has not recovered since the housing market has not shown any signs of warming up as the number of new houses continuously declines. Meanwhile, steel manufacturing enterprises had to release many existing inventories. The sharp drop in raw material and fuel prices in the second half of 2022 will also support the price reduction process.
In Vietnam, the situation is similar because of the pressure to reduce prices according to the world market. Domestic steel demand dropped sharply in the second quarter, causing manufacturers to lower their selling prices to speed up inventories.
In a more optimistic view, VnDirect forecasts stable steel prices in the last months of the year. The risk from steel prices is low when Chinese steel mills' operating efficiency and inventories are at the lowest level in a year. The fourth quarter of 2022 is the peak of construction and steel consumption in Vietnam's market.
Agribank Securities Joint Stock Company (Agriseco) stated that energy shortages tend to become more severe in Europe, causing some industries that use a lot of energy to cut production, including steel production. That creates opportunities to improve business activities for exporters when entering the European market.
Source: vnexpress, laodong.vn
Compiled by VietnamCredit