Hanoi Iron and Steel (HSV) - In the past week (August 29 - September 4), steel prices had a slight increase after a series of decreases 15 times in a row in nearly 4 months with an increase of 110 - 600 VND/kg.
Turn the gain back on
Last August 31, the domestic steel market, after 15 declines, rebounded. Steel enterprises have announced price increases ranging from 110 - 600 VND/kg.
Specifically, Hoa Phat steel brand adjusted the selling price to 260 and 150 VND, corresponding to its two product lines including CB240 steel coil line at 14,630 VND/kg; D10 CB300 rebar steel is priced at 15,280 VND/kg.
Or with VAS steel, with CB240 steel coil at 14,210 VND/kg - an increase of 210 VND; D10 CB300 rebar steel line is priced at 14,570 VND/kg - an increase of 180 VND. Currently, domestic steel prices fluctuate at 14,000 - 15,000 VND/ton depending on the type of steel and brand.
Vietcombank Securities Company (VCBS) forecasts that real estate supply will recover and policies to promote public investment will be a big driving force to help boost steel consumption.
However, construction projects will be promoted when steel prices maintain a stable price level. Therefore, growth will be reflected later when steel prices stabilize.
Specifically, the remaining capital planned to be disbursed in 2022 and 2023 will be a strong driving force to promote the construction of infrastructure projects as well as the demand for construction steel consumption.
Along with that, real estate supply in the near future is expected to grow well in 2023 after the process of tightening capital sources into the real estate market in 2022. VCBS expects that the policy will gradually relax for investors in 2023, helping supply to clearly recover.
In addition, the Government is also urgently reviewing legal issues and completing the legal framework related to the real estate sector to remove difficulties to help the real estate market develop more stably.
Expectations from the Chinese market
VCBS expects steel prices to recover in the second half of 2023 after falling to a lower price level than currently, due to the fact that stimulus policies need time to clearly show their impact to help revive the very weak demand of the Chinese market.
In the same vein, according to CNBC, global mining companies are confident that China's stimulus will help boost demand for steel and iron ore. Specifically, China's largest iron ore suppliers are optimistic about Beijing's plan to introduce policies and stimulus measures to boost the steel industry as the country faces economic difficulties and the real estate industry is struggling.
The Beijing government has introduced many stimulus policies including an additional 300 billion Yuan ($44 billion) in quotas for banks' spending and infrastructure investment - higher than the 300 billion Yuan announced at the end of June.
While there are uncertainties surrounding the strength of demand and steel production in China, miners such as Australia's Fortescue Metals Group say there is no sign of demand falling so far due to low iron ore inventories at Chinese ports.
"The market is cyclical, it's often determined by the outlook for steel production in China... and we saw China last year, produce just over a billion tons of crude steel. We think China could be on track to produce a similar amount of crude steel this calendar year," Fortescue CEO Elizabeth Gaines said.
Last year, China produced 1.033 billion tons of crude steel, the first annual decline since 2016. National steel output in the first seven months of this year decreased by 6.4% compared to the same period last year.
In its forecast late last year, the China Metallurgical Industry Planning and Research Institute said it expected China's 2022 output to slow to 1.017 billion tons - down nearly 1.5% from the previous year.
Despite tepid demand for steel in China this year due to Covid-19 lockdowns, Fortescue's iron ore supply hit a record 189 million tonnes in the 2021/2022 financial year, allowing the company to post its second-highest earnings of a record $17 billion for the same period, financial results showed.
About 88% of Fortescue's iron ore sales are to China. However, the company's earnings fell to last year's $22 billion as iron ore prices fell, in response to weakening economic conditions in China this year.
A Fortescue spokesperson said that, while there are uncertainties about China's steel production, the company believes that Beijing's "increased infrastructure investment, continued government policy support and further relaxation of Zero-Covid policies" will continue to boost steel demand and, therefore, production. Other major iron ore suppliers are also positive about China's industrial sector.
BHP UK-Australia chief executive Mike Henry said while announcing BHP's annual results two weeks ago that he expected China to be a "steady source of commodity demand next year, with policy support gradually taking hold".
Even during major shutdowns in the second quarter of the year, China's furnace utilization rate - or steel mill activity - remained resilient, he said.
"So we believe and continue to believe that as China comes out of lockdown, as there is a little bit more stimulus being provided and all the policy settings that we see in China right now are consistent with that. Including the recent meetings and what's going on in those, we will see the Chinese economy take a new step forward," Mr. Henry said.