| Exports increased by nearly 50% in 2 months, has the steel industry overcome the "extreme crisis"? Steel price today, March 9, 2024: "Big guys" in the steel industry increase production |
Pressure - still breaking through
Going through 2023 with many difficulties and challenges due to declining domestic consumption demand and construction steel prices, many steel enterprises have planned strong growth in 2024, with optimistic expectations for this year's steel market.
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| It is forecasted that steel consumption in 2024 is likely to reach nearly 21.6 million tons, an increase of 6.4% compared to 2023. |
According to data from Trading Economics, after a slight recovery in the second half of 2023, from November 21, 2023 to February 28, 2024, world steel prices fell 5.9%, from 4,019 CNY/ton to 3,781 CNY/ton. Compared to the peak of 5,925 CNY/ton on October 8, 2021, current steel prices are 36.2% lower.
Weak demand in the Chinese steel market in the context of the country's slowing economic growth, the real estate market has not recovered, the electric vehicle manufacturing sector and consumer goods have shown signs of oversupply, causing Chinese steel products to continue to be exported at low prices to reduce inventory. This is the main reason why world steel prices have decreased and steel prices in Vietnam have not recovered as expected, and the gross profit margins of many steel manufacturing enterprises have improved more slowly than expected. In addition, China has increased steel exports to Southeast Asian countries such as Indonesia, Thailand, and the Philippines, putting more competitive pressure on Vietnamese steel enterprises, as these are also major export markets.
Despite such pressure, the production and sales situation in the first 2 months of 2024 of Hoa Phat Group Joint Stock Company specifically produced 1.38 million tons of crude steel, an increase of 71% over the same period in 2023. Sales of HRC steel products, construction steel, high-quality steel, and steel billets reached 1.15 million tons, an increase of 32% over the same period in 2023. Of which, construction steel and high-quality steel reached 575,000 tons, down 2% over the same period in 2023. HRC steel contributed 542,000 tons, double the same period last year. Hoa Phat steel pipes recorded 88,000 tons after 2 months; galvanized steel of all kinds reached an output of 66,000 tons, mainly thanks to the export output of galvanized steel in the past 2 months being better than the same period in 2023.
Another large enterprise in the steel industry, Hoa Sen Group Corporation, also expects its profit for the 2023-2024 fiscal year (from October 1, 2023 to September 30, 2024) to grow strongly compared to the previous fiscal year. Specifically, Hoa Sen has proposed two business scenarios. With scenario 1, sales output will reach 1,625 thousand tons, up 13.3% compared to the previous fiscal year; expected revenue will be VND34,000 billion, up 7.4% and expected after-tax profit will be VND400 billion, up 12.33 times.
Notably, according to the General Statistics Office, in the first two months of 2024 alone, steel was among the top industries with export turnover of 1 billion USD or more, an increase of 45.5% over the same period in 2023.
Consumption output forecast to grow by double digits in 2024
With the above recovery signals, Ms. Trang Thi Thu Ha, Chief of Office of the Vietnam Steel Association (VSA), forecasts that steel consumption in 2024 is likely to reach nearly 21.6 million tons, an increase of 6.4% compared to 2023. Of which, finished and semi-finished steel exports are expected to increase by 12%, reaching nearly 13 million tons. This target is based on the expectation that Vietnam's GDP will increase by 6 - 6.5% this year.
In a recent report by MBS Research, domestic steel prices in 2024 are expected to recover to VND15 million/ton (up 8% compared to last year) thanks to the increase in world steel prices and warming demand in the Vietnamese market. A series of support policies from the Government and the State Bank are expected to help the real estate market recover from mid-2024, and the supply of apartments is expected to grow by 20% (according to CBRE's forecast), which will boost demand and positively impact domestic steel prices. Coal and ore raw material prices are expected to decrease slightly by 7% and 6% compared to last year in the context of stable supply and declining demand for crude steel production in China, also creating an advantage for steel producers. The expected recovery in selling prices and cooling raw material prices will boost the gross profit margin of businesses in the industry.
Steel industry enterprises believe that the real estate market will recover in the second half of 2024, creating demand for the steel industry.
For example, Hoa Phat's 2024 business results are forecast by Dragon Capital Securities Company (VDSC) to increase by 22.5% in revenue to VND 143,709 billion and increase by 91% in after-tax profit to VND 10,897 billion.
Similarly, VDSC forecasts that Hoa Sen Group Joint Stock Company could achieve VND36,702 billion in revenue and VND847 billion in after-tax profit in fiscal year 2024 (from October 1, 2023 to September 30, 2024), up 16% and 27.2 times, respectively, compared to fiscal year 2023.
VDSC said that the expectation of business results growth of steel enterprises in 2024 comes from the recovery prospect of the domestic construction steel market, while steel prices are likely to increase, helping to improve gross profit margins.
DSC Securities Company also has a positive assessment of the steel industry when forecasting that consumption output in 2024 will grow by double digits, because real estate projects after the restructuring and legal approval period will be resumed to meet new demand in the coming period, in addition to public investment projects being accelerated.
| To support the steel industry to recover and develop, economic experts suggest that the Ministry of Industry and Trade should continue to research and appropriately apply trade defense measures to protect the domestic steel market. Along with that, it is necessary to strengthen coordination with associations and enterprises in the steel industry to take advantage of opportunities in the domestic market from the disbursement of public investment capital for large traffic and construction projects. Thereby promoting domestic production supply, creating breakthrough growth, developing steel production, construction materials and mechanics... |
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