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Overview of Vietnam’s steel industry 2023

Overview of Vietnam’s steel industry 2023

Friday 21, 04 2023
The steel industry is witnessing difficulties due to a sharp drop in demand, slow consumption and increase in inventories.

Decreasing demand

According to data of the Vietnam Steel Association (VSA), in 2022, finished steel production reached more than 29.3 million tons, down nearly 12% compared to 2021. Sales of finished steel reached 27.3 million tons, down more than 7%. In particular, exports decreased by more than 19%. The difference between production and sales amounted to more than 2 million tons of finished steel.

Vietnamcredit Vietnam Steel Association

VSA assesses that, for Vietnam's steel industry, 2022 was a challenging year when the domestic consumption market declined, the price of steel production materials fluctuated, and many steel enterprises fell into difficult situations and suffered from losses. Therefore, VSA believed that the difficulties faced by domestic steel industry are likely to last until the second quarter of 2023.

In the recent steel industry update report, SSI Securities also said that domestic demand may continue to weaken due to the stagnant real estate market and tight monetary policy.

Individual customers (the household channel), which used to be more resilient, could also be affected by a slowdown in the overall economy, with higher unemployment and interest rates. SSI believes that the domestic demand for finished steel products may decrease by single digits in 2023.

Industry outlook in 2023

Forecasting the situation of the steel market in 2023, some experts believe that fierce competition in the domestic market, tight monetary policies, increasing interest rates, and escalation of exchange rates may negatively affect the economy and the needs and production and business activities of companies within the industry. Besides, the low demand of the domestic civil construction sector will significantly affect the demand for construction materials, including steel.

Vietnamcredit VNDIRECT

At the recent DInsights forum "Stock market volatility: The focus of the steel and real estate industry", a representative of VNDIRECT Securities Joint Stock Company said that currently 60% of steel production is used for civil construction in Vietnam and is closely related to the real estate market. However, the real estate market is forecasted to continue to face difficulties in the coming time, affecting steel consumption.

For exports, the ASEAN market - consuming about 10% of Vietnam's total steel, in 2023, except for Indonesia as a bright spot, countries like Thailand or Singapore all saw construction activity slow down. Therefore, the steel consumption demand of the ASEAN region is expected to grow slowly or flatly.

For Europe and the US (which consumes 3% of total steel), industrial production has not shown any positive signs, so demand is unlikely to have a strong increase, especially when the US Federal Reserve (Fed) may raise interest rates at least 2 more times in the first 6 months of the year.

However, the market still recorded a number of factors supporting the growth of steel enterprises until the end of the year when the demand for iron and steel is expected to improve thanks to more public investment projects being implemented. Specifically, in 2023, the Ministry of Transport was assigned by the Government to disburse public investment with a capital of up to VND 94,161 billion, 2.2 times higher than in 2021 and 1.7 times in 2022.

In addition, positive signals from the export market, especially recovering demand in China - the largest steel producer and consumer, accounting for more than 50% of total supply and demand in the world - will support Vietnamese steel enterprises.

However, the research team of DSC Securities Company also noted that these recovery signals are still quite weak and likely to be unsustainable. Although China has abolished Zero - Covid, it will still take a certain amount of time to really restart the economy.

Vietnamcredit profit in 2023

According to VNDIRECT, the steel industry will have a positive growth in profit in 2023 thanks to the low base of 2022. However, considering the small number of short-term positive factors, the number of risks is greater. Therefore, it is necessary to see how each company's business model can respond to current changes and risks.

Source: VSA, SSI Securities, VNDIRECT Securities

Compiled by VietnamCredit



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