(HSV VIETNAM GROUP) – MBS expects the gross profit margin of businesses to improve from an average of 8% in 2023 to 13% in 2024.
After a period of strong adjustment, steel industry stocks recorded a significant recovery in the first half of November. From the beginning of the month until now, the market prices of most stocks recorded double-digit percentage increases, HPG increased by 16%, HSG increased by 28%, NKG increased by 27%, SMC increased by 11%, TVN increased by 11%, TLH increased by 22%,...
The price movements of steel industry stocks are in sync with the strong recovery of world steel prices. Currently, rebar steel prices in China have recovered about 12% over the past 3 weeks to 4,031 CNY/ton. On the contrary, refined coal prices are anchored at a low level, around the bottom. Data from tradingeconomics shows that coal prices are currently fluctuating below the threshold of 123.25 USD/ton.
In addition to price factors, the picture of the world steel industry in general is showing more positive signals. In a newly updated report, MBS Securities assessed that the world's supply is reduced and world steel demand is expected to recover in 2024. Specifically, steel supply decreased slightly by 1% over the same period in the context of China cutting production and Turkey not being able to recover. Meanwhile, world demand according to WSA's latest forecast will increase by 1.9% with the main driving force coming from construction demand in the EU and India, this is expected to also have a positive impact on world steel prices in 2024.
Domestically, domestic construction steel consumption in 2023 recorded a low level in the context of a quiet real estate industry when project supply decreased sharply. At the same time, weak demand for steel due to a decline in real estate supply caused construction steel prices to plummet. For the whole year 2023, MBS forecasts that domestic steel prices will maintain around 139 million VND, down 20% over the same period last year.
However, apartment supply is expected to improve from 2024, which will positively impact domestic construction steel demand. Furthermore, the Government has issued a number of measures to support the real estate market. MBS expects positive factors from world steel prices and the real estate market to recover from mid-2024 to boost domestic steel prices. Thanks to that, construction steel prices are expected to recover to 15 million VND/ton, an increase of 8% by 2024. Meanwhile, the increase in raw material prices may only take place in the short term and will cool down in 2024 when China's demand for steel production decreases.
The analysis team also believes that recovering demand from the EU is the main factor with a positive impact, making the export steel market a bright spot. Steel export output is expected to reach 10.5 million tons (up 25%) in 2023 and 11.2 million tons (up 7%) in 2024. Besides, export HRC price is expected to reach 800 USD/ton (+8%) in 2024.
Total profit of the steel industry is expected to grow by 40% in 2024
Looking specifically at steel industry enterprises, MBS expects the gross profit margin of enterprises to improve from an average of 8% in 2023 to 13% in 2024. Steel prices are forecast to recover about 8% and raw material prices to decrease slightly by 6%, from there, the basis for the gross profit margin of enterprises in the industry to recover to double-digit levels next year.
MBS noted that coal and ore prices have tended to increase since the beginning of September in the context of steel factories in China increasing inventory accumulation before having to implement a policy of cutting production in 2024. Iron ore supply in 2024 continues to improve when output in Australia is forecast to increase by 2.9% to 1.01 billion tons according to the forecast of the Ministry of Industry and Science of this country.
Along with profit margin, total profit of steel industry enterprises is expected to grow 40% over the same period in 2024 thanks to expected revenue recovery of 25% in the context of output and selling price growth; Gross profit margin recovered to 13% (compared to about 8% in 2023) as well as financial costs decreased by 30% when exchange rate pressure and interest costs cooled.
Ha Diem HSV