Looking back to 2024, has the steel industry found a breakthrough opportunity?

After a long period of decline, our country's steel industry has received many signs of recovery this year.

It can be said that these encouraging bright spots show that our steel industry has passed the most difficult period. However, with many challenges still present, our steel industry still needs more time to be able to break through to a new growth phase.

Domestic steel market receives recovery signals

During the period of 2022 - 2023, our country's steel industry witnessed a sharp decline due to a series of challenges such as high input material prices and declining demand. However, from late 2023 to early 2024, the steel industry has received initial signs of recovery, including improved domestic demand and a more optimistic picture of the world steel industry.

According to statistics from the Vietnam Steel Association (VSA), in the first quarter of this year alone, our country's finished steel production reached 7.06 million tons, up 5.5% over the same period last year. Consumption reached 6.68 million tons, up 10% over the same period. Exports also recorded good growth, reaching an increase of 36% over the same period to 2.25 million tons. Domestic steel prices also recovered from a 3-year low and continuously increased during this period. From November last year to March this year, steel prices in the North experienced a total of 6 consecutive price increases. The price of CB240 coil steel increased to 14.34 million VND/ton, an increase of about 910,000 VND after 6 adjustments. The price of D10 CB300 rebar also increased to 14.53 million VND/ton, an increase of about 790,000 VND compared to the end of November.

In the second and third quarters, the steel industry became quiet again, but in general, it still maintained a more stable growth rate compared to the same period last year. Notably, at the end of the third quarter and the beginning of the fourth quarter, the steel industry received important support from the "heat" of the Chinese steel industry. At this time, steel prices here have recovered from a multi-year low and even climbed to a 3-month peak. The price of raw materials for steel production, iron ore, has also continuously increased. Accordingly, steel prices in the domestic market have also begun to increase again since the end of September. After many consecutive adjustments, steel prices in our country are currently stable at around 14 million VND/ton.

Domestic construction steel price developments from the beginning of 2023 to present

Thus, looking from a positive perspective, our country's steel industry has now passed the most difficult period and is gradually restoring stability. Many businesses have witnessed improvements in consumption demand, revenue and profit margins, cheap inventories are gradually being released, and steel prices are gradually recovering. However, it is still impossible to confirm that our country's steel industry has completely recovered and is about to witness long strides of growth, because this industry is still facing many intertwined difficulties and challenges.

Steel industry still faces many "thorns"

Assessing the prospects of the steel industry in the coming time, Mr. Duong Duc Quang, Deputy General Director of the Vietnam Commodity Exchange (MXV), commented that this year, the Vietnamese steel industry has shown many signs of recovery and is gradually stabilizing after a long period of decline.

Mr. Duong Duc Quang, Deputy General Director of Vietnam Commodity Exchange (MXV)

However, these are only initial signs of recovery, this recovery is still uncertain and unsustainable because consumption demand has not really broken through. The recovery data is mainly compared based on the low base level of last year. In addition, the world steel industry is still facing many difficulties due to the negative impact of the Chinese steel crisis. Therefore, in the short term, our steel industry cannot break through to a new growth phase and is expected to continue to be sluggish, at least in the first half of next year.

Indeed, despite efforts to recover, our country's steel industry still faces many challenges from both domestic and international markets.

First, the recovery of the domestic steel industry this year is still partly due to the low base level of 2023, rather than a clear improvement in consumption demand. In 2023, our country's steel industry witnessed a sharp decline due to the frozen real estate market, reduced construction projects, and also the impact of the weakening of the Chinese industry. The sharp decline in demand has caused businesses to continuously lower steel prices, most notably a series of 19 consecutive price cuts lasting until November, bringing domestic steel prices to a 3-year low. Meanwhile, considering the context of the steel industry this year, compared to the first quarter, when steel demand and production recorded good growth, the second and third quarters were much quieter.

Second, our country’s steel industry is heavily dominated by China’s steel industry. This country is currently struggling with a steel surplus crisis and its giant industry is on the decline, with steel prices continuously falling to multi-year lows. Therefore, our country can hardly avoid negative impacts like a “domino effect”. Moreover, this country’s continuous push to export cheap steel may put domestic enterprises at risk of losing market share.

China's steel exports

Third, export activities face many difficulties because businesses are facing trade defense lawsuits, anti-dumping, anti-subsidy, and self-defense technical barriers set up by import markets. According to statistics, by the end of October 2024, of the total 267 foreign trade defense investigations with Vietnam, about 30% of the cases were related to steel products. Notably, these lawsuits mostly occurred in our country's major steel export markets such as the US, the European Union (EU), Australia, India, etc.

With these challenges, our steel industry is unlikely to achieve a strong breakthrough in the short term and is expected to continue to remain stagnant, at least in the first half of next year. However, in terms of opportunities, this can be considered a time for the Vietnamese steel industry to make efforts to improve and seek a more sustainable direction in the future.

Source: https://congthuong.vn/nhin-lai-nam-2024-lieu-nganh-thep-da-tim-duoc-co-hoi-but-pha-365072-365072.html