Hanoi Iron and Steel (HSV) - The year 2021 marks a historic turning point for Vietnam's steel industry by achieving a miracle when it first entered the list of products with an export turnover of over 10 billion USD, and at the same time turning our country into a steel export country after many years of trade deficit. Entering 2022, in the face of many changes in the world, the steel industry is expected to continue to grow, but it is predicted that it will also face many risks and challenges.
Growth prospects
According to data from the General Statistics Office, in 2021, export output of iron and steel of all kinds will reach 13.096 million tons, export turnover will reach 11.795 billion USD, an increase of 123.4%, and imports will reach 11.523 billion USD, an increase of 42.6% over the same period in 2020; Trade surplus reached 272 million USD.
Vietnamese steel products have been exported to more than 30 markets around the world. Construction steel exports in 2021 alone have increased 1.5 times compared to the same period in 2020, equivalent to about 2.2 million tons.
Some markets accounting for a large proportion of steel exports in 2021 include: ASEAN reaching 3,093 billion USD, accounting for 26.2% of total turnover, EU reaching 1,866 billion USD, accounting for 15.98%, China reaching 1,666 billion USD, accounting for 14.12%, America reaching 1,365 billion USD, accounting for 11.57%...
The Vietnam Steel Association said that in 2021, despite many negative impacts from the Covid-19 pandemic, making the real estate market less vibrant, accompanied by a decline in construction activities, and domestic production and consumption being affected due to social distancing, production and sales of steel products of all kinds still increased quite well due to the inheritance of good business results in the first months of 2021 and the return to excitement in the export market in the last months. year. Accordingly, crude steel production reached about 23 million tons, an increase of 16%; Production of finished steel products of all kinds reached 33 million tons, up 19% and finished steel products of all kinds reached 29 million tons, up 16% over the same period.
In addition, a number of new generation FTAs such as CPTPP, EVFTA, RCEP,... have been implemented, bringing positive signals to the steel industry when there are new export markets with high growth. The promotion of exports has helped diversify consumer markets when the domestic market was affected by the Covid-19 pandemic.
Assessing the growth prospects of the steel industry in 2022, Maybank Kim Eng Securities Company (MBKE) said that entering 2022, when the 2022-2023 economic stimulus package is approved, it will quickly help the domestic market recover. In addition, the infrastructure construction investment package worth VND 150 trillion, plus the existing VND 530 trillion, will help public spending increase by about 38%. Steel industry enterprises expect to benefit from a wave of public investment in 2022 when the economy has many optimistic signs to be able to return to a good growth trajectory when the epidemic is controlled. In addition, adjustments to the Construction, Investment and Real Estate Law will help remove bottlenecks that are preventing the development of the real estate industry in recent years. MBKE forecasts that these factors will help the domestic steel market recover, growing from 15% to 20%.
According to forecasts of Mirae Asset Securities Company (Masvn), in 2022 the steel industry will continue to be evaluated positively based on the following arguments: Hot rolled coil steel prices (HRC) are expected to remain high as China and Australia continue to have trade tensions, putting pressure on iron ore supply; Global production output reserves recover from the end of 2021 and there is still room for 2022; Domestic steel industry output recovered along with real estate and construction industries; Interest rates decrease, debt/equity ratio decreases. Finally, Masvn believes that the steel export market in 2022 will continue to expand under the impact of the war between Russia and Ukraine. Accordingly, Russia currently ranks second in steel exports to the EU, with a proportion of 14.1% flat steel and 19% long steel, Ukraine accounts for 8% flat steel and 7.4% long steel, and Belarus accounts for 14.4% long steel. The above supply shortage will help Vietnamese steel companies continue to benefit from exports, especially from the European and American markets. Along with that, for the whole year of 2021, anti-dumping tax policies for Vietnam have not changed significantly, remaining at very low levels or non-existent. Except for some products exported to Thailand or Australia, which account for less than 5% of total steel export output, the export segment of the steel industry promises to continue to have a bright 2022.
A report by VietcomBank Securities Company (VCBS) also stated that when China gradually reduces export output, causing a shortage for partners who regularly import steel from this country, it will open up opportunities for surrounding countries, including Vietnam.
For the European market, safeguard measures such as applying quotas make it difficult for countries with large exports to Europe to increase output to meet sudden increases in demand in the short term. This will also be an opportunity for Vietnamese steel enterprises to export to this market. Along with that, in terms of price, the current steel production price of Vietnamese enterprises is quite competitive because manufacturers have autonomy in the supply of hot rolled coil steel (HRC). In particular, in the Vietnam Steel Market Outlook Assessment Report, the Vietnam Steel Association (VSA) said that 2022 is also forecast to be better when the Government issues instructions to stabilize and develop production and business activities to flexibly adapt to the Covid-19 pandemic. Along with Resolution 01/NQ-CP issued on January 9, 2022 with solutions for development, socio-economic recovery and budget estimates for 2022 along with solutions to maintain growth momentum and exploit new growth drivers identified by the Government in 2022, including restoring and promoting production and business; Boosting exports and speeding up the disbursement of public investment capital, mobilizing all resources for infrastructure development will be a support for the steel industry to develop stronger in 2022...
In addition, with the active participation of the Government and sectors and levels, the Covid-19 epidemic situation is better controlled, creating conditions for steel factories to operate stably, ensuring steel supply for the domestic market as well as export... Those factors will contribute to helping the steel industry maintain production and development. The Vietnam Steel Association expects that in 2022 crude steel production growth will be about 8-10% compared to 2021; Production and consumption of finished steel products have a corresponding growth rate compared to 2021...
RISKS AND CHALLENGES IN 2022
Although it is assessed that there are still many development prospects, reality shows that, after a year with many successes, entering 2022, Vietnamese steel industry enterprises are facing many challenges and risks due to fluctuations in the domestic and world markets. Some risks are mentioned, such as:
Risk of raw material price fluctuations. Experts say that the steel and galvanized steel industry in 2022 is forecast to have great risks because raw material costs account for 65-75% of production costs. Especially in the galvanized steel industry, the price of hot rolled coil (HRC) accounts for more than 80% of input material costs, causing the industry's profits to fluctuate greatly according to HRC. Along with that, coke and iron ore prices have continuously tended to increase very strongly in the first months of the year, causing the construction market to decline in growth rate, thereby directly affecting output.
Mirae Asset Securities Company said that in 2022, the real estate and construction industry will recover, thereby boosting the output of the entire steel industry, however, it will be difficult for output to grow as suddenly as in 2021 when most domestic steel companies have run at full capacity and no new major projects have been introduced. Therefore, this securities company forecasts that the entire industry's steel output in 2022 will reach about 33.3 million tons, an increase of 8% over the same period in 2021, of which, export output alone will reach 8.7 million tons, an increase of 15% over the same period in 2021.
Risk of anti-dumping tax in the export market: It can be seen that, along with the strong growth in export activities, steel is one of the products most frequently initiated by foreign countries for trade defense investigations. Meanwhile, currently, Vietnamese steel is not only present in the traditional market of Southeast Asian countries, but also expanded to large markets, such as Europe, America... The rapid increase in Vietnam's steel export turnover has made many countries pay attention and increase investigations to apply trade defense measures. From 2004 to October 2021, the number of trade defense cases against Vietnam's exported steel was 66 cases, and there were even many cases investigated in which trade defense measures were applied with very high tax rates. Steel anti-dumping tax lawsuits mostly come from the main markets in Vietnam's steel exports such as the United States, the EU, and some countries in the ASEAN region. In particular, recently, Mexico has emerged as the market that initiated many trade defense investigations due to the rapid increase in Vietnam's steel export turnover to this market... Therefore, it is forecast that in the coming time the steel industry will face many risks of anti-dumping taxes in the export market.
Comments from Mirae Asset Securities Company also said that the Vietnamese steel industry currently exports a lot (19.56% of total sales output) to countries such as China, the EU, the US... Therefore, there still exists a huge risk from tariff policies changing in the context of the ongoing trade war between China and other countries.
Export activities may face some obstacles when construction material prices are high. As of March 2022, construction steel prices have increased to 18.3 million VND/ton. This is a warning sign that iron and steel export activities will face many difficulties. Because when the price of construction materials is high, some steel lines will be restricted from export. Among them, construction steel billet is the product line that is expected to face this risk first.
In addition, according to a report by Rong Viet Securities Company (VDSC), changes in trade policy may affect profit margins and export output in the near future, when a sharp increase in iron and steel output to the EU may lead to the application of quotas starting from July 2022 for some Vietnamese products. In addition, in October 2021, the US also agreed to introduce tariff quotas for the EU, effective in January 2022. Accordingly, from January 2022, the US will lift the existing 25% tariff on EU steel products for a tariff quota of 3.3 million tons (equivalent to 12% of US import volume). Faced with the current situation, VDSC believes that Vietnamese steel manufacturers can increase export output to ASEAN when demand from Europe and North America decreases. However, gross margin will be lower than in 2021
Facing forecasts of development prospects and intertwined challenges in 2022, to grasp opportunities and limit risks, steel industry enterprises need to continue to closely follow the market, have solutions to improve competitiveness, boost production, improve governance, establish value chains to expand export space, and disperse trade defense risks in some markets.
For export activities, businesses need to be careful with some concerns related to trade defense issues when Vietnam's steel export activities are increasing. Focus on improving legal capacity, financial resources, and further transparency in the accounting book system according to international standards so that when there is an inspection request, businesses can fully proactively demonstrate the transparency of their products...
Along with that, to accompany businesses, state management agencies need to provide additional support for businesses in applying trade defense measures, as well as responding to trade defense lawsuits by countries against Vietnam's exported steel products to reduce damage./.
Source: consosukien.vn
Link: https://consosukien.vn/nganh-thep-vie-t-nam-trie-n-vo-ng-va-tha-ch-thu-c-trong-nam-2022.htm