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Does the heat of steel companies in Vietnam remain?

Does the heat of steel companies in Vietnam remain?

Tuesday 05, 10 2021
Steel companies in Vietnam saw a steep drop in domestic steel consumption. However, steel export keeps reaching higher in volume over the past months, maintaining the heat of the industry.

Export has been Vietnam steel companies' "savior"

COVID-19 hinders the development of many industries, steel included. The spreading pandemic, and the ongoing rainy season, halted the demand for construction, which, in turn, decreased the steel demand.

The Vietnam Steel Association (VSA) said that steel companies had to find a way to boost exports to solve those hindrances.

The Vietnam Steel Association

A report of VSA stated that steel production in July 2021 of all kinds reached nearly 2.4 million tons, down 6.48% compared to the previous month. Steel consumption was over 2.1 million tons, an increase of 7.4% compared to July 2020. Steel exports reached 658,207 tons, increased by 5.96% compared to the previous month.

Trang Thu Ha, Chief of Office of VSA, said that due to the influence of the COVID-19 pandemic and seasonal weather factors, the production and sales situation of the steel industry faced many difficulties. With the pandemic outbreak in the southern provinces, it is expected that production and consumption in the last months of 2021 will be with much hardship. The representative of VSA also said that the increase in consumption volume mainly happened because of the increase in steel export output of enterprises.

Specifically, according to VSA, sales of construction steel in the first seven months of 2021 increased by 6.4% over the same period in 2020, consumption in the domestic market increased by 3%, and export rose by 25.4%. Construction steel consumption in July witnessed many difficulties when entering the rainy season. Due to the impact of the COVID-19, many constructions and civil works were temporarily postponed, leading to difficulties in the domestic steel consumption market, especially in the southern region.

Hot-rolled coil production reached more than 590,000 tons, down slightly by 1.21% compared to June 2021 but increased by 85.4% over the same period in 2020. Its consumption reached 559,487 tons, down 6.75% compared to June, but up 82.7% over the same period in 2020.

As for colour-coated metal sheets, in July 2021, consumption reached 428,084 tons, down 6.58% over the previous month, but up 18.8% over the same period in 2020, in which the amount exported was 300,404 tons, an 84.2% increase compared to the same period in 2020.

Consumption

Hoa Sen Group and Nam Kim Steel Joint Stock Company are leading in general steel consumption. In 7 months of 2021, Hoa Sen sold nearly 1.1 million tons, gaining 36.7% market share. Nam Kim consumed more than 498,000 tons, ranked second with a 16.8% market share. Hoa Phat's galvanized sheet and steel pipe products also increased sharply.

 

Does the heat remain?

Analysts said that the increase in steel exports was to meet the constantly increasing demand for steel due to the boom of the auto industry and the post-pandemic recovery of the construction industry. Meanwhile, the steel source in the world's largest steel-producing country, China, is tightening the implementation of green environmental solutions. Most of the world's major steel production centers, such as the EU, the United States, Japan, and South Korea, continue to focus on meeting domestic demand and restrict exports.

Particularly in China, although Vietnam's export volume in this market has recorded a decrease in recent years, Maybank Kim Eng Securities One Member Limited Liability Company believes that this country will soon increase steel imports. Steel imports would help China meet the goal of infrastructure investment to implement the socio-economic development plan and long-term goals until 2035 while limiting steel production by blast furnace technology with the previously issued carbon emission reduction policy. Moreover, China has just decided to cut the export tax refunds on some steel products and considered increasing the steel export tax.

With the above move, analysts of DSC Securities Joint Stock Company put great expectations on the growth of Hoa Phat Group Joint Stock Company with the advantage of producing steel by blast furnace technology. Hoa Phat will have the opportunity to boost the export of billet and finished construction steel to China to compensate for the weakening demand in the domestic market.

Hoa Phat Group Joint Stock Company

Along with that, Hoa Phat is enjoying the benefits when exporting to many markets outside China when the price of raw iron ore (accounting for 35% of total production costs) is falling sharply, and the price of output steel is anchored at a high level in recent times.

As for export markets, the European Union (EU) and the United States are Vietnam's iron and steel export markets with outstanding value-added. The World Steel Association (Worldsteel) forecasts that steel demand in these two markets will increase by more than 10% in 2021 and has room to continue to grow in 2022. In particular, after officially signing the Free Trade Agreement EVFTA, the EU - Vietnam's major export market, is imposing steel import quotas for Turkey and China, creating a great demand for Vietnam coated steel sheets. Besides, with the domestic steel price kept at a lower level than the world, it helps to increase the profit margin for galvanized steel sheet exporters such as Hoa Sen and Nam Kim Steel.

On the other hand, in the last months of the year, steel enterprises may face risks. DSC Securities Joint Stock Company warns exporters of coated steel sheets when Vietnam is subject to anti-dumping tax in some markets such as Malaysia and possibly Indonesia. For instance, Malaysia imposed an anti-dumping duty on Nam Kim Steel at the rate of 34%. That may affect the business results of the business at the end of the year.

 

Compiled by VietnamCredit

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