(HSV VIETNAM GROUP) – 2023 is a difficult year for Vietnam's steel industry due to impacts from both inside and outside. Construction steel prices in 2023 will tend to decrease. However, according to many expectations, the steel industry in 2024 will receive signs of improvement...
In 2023, Vietnam's steel industry has experienced many difficulties and a gloomy market. However, at the end of the year, the steel industry had positive signs and the market improved. By 2024, the steel industry is expected to recover and have better growth.
21 PRICE REDUCTION IN 1 YEAR
In 2023, Vietnam's domestic construction steel market will have about 34 official listed price adjustments. Of these, there were 21 price reduction adjustments with a total reduction of rolled steel from 2.15 to 2.35 million VND/ton, rebar steel from 1.9 to 2 million VND/ton. The remaining are 13 official price increases with a total increase to date of 1.8 million VND/ton for rolled steel and from 1.55 - 1.95 million VND/ton for rebar steel.
Thus, construction steel prices in 2023 will tend to decrease and the average price of construction steel on the domestic market in 2023 will decrease by 9.6 - 10.4% compared to 2022.
According to Mr. Nghiem Xuan Da, Chairman of the Vietnam Steel Association (VSA), steel prices decreased due to the frozen real estate market and a decrease in construction projects. In addition, the steel market is also affected by factors in the world steel market, especially the Chinese market.
VSA Chairman said that in construction projects, steel prices account for about 30% of the cost structure of infrastructure construction materials. In the last months of 2023, public investment projects often "run" on disbursement schedule. Therefore, the steel industry will also benefit when sales volume will increase.
Regarding output, Vietnam Steel Corporation (VNSTEEL) said that in December 2023, the entire system will reach a consumption output of over 322,800 tons, up 23% over the same period in 2022. Of which, construction steel contributed over 224,700 tons, up 6% over the same period; Flat steel output reached over 98,100 tons, an increase of 93% over the same period.
Cumulatively for the whole year 2023, finished steel consumption will reach over 2.93 million tons, down 13% compared to 2022. Of which, construction steel will reach over 2.13 million tons, down 20% compared to 2022, flat steel will reach over 0.79 million tons, up 17%.
According to data from the General Statistics Office, in 2023, rolled steel production nationwide will increase by 12.7%, bar steel and angle steel will decrease by 8.9%. Among industries, bar and angle steel production is one of the key industries but still faces many difficulties due to the influence of many adverse factors.
Steel bar and angle steel output in all three quarters of 2023 compared to the same period in 2022 will decrease. In the first months of the year, steel prices continuously decreased due to slow demand, the number of civil projects being started was small, public investment activities were gradually promoted but not enough to help the steel market better.
Meanwhile, domestic manufacturers still have to compete with cheap steel from China when this country continuously lowers export prices. By the fourth quarter of 2023, steel bar and angle steel production will gradually recover and output will increase by 12.1% over the same period in 2022.
In the first half of 2024, domestic steel prices recorded a price increase on January 8. After the increased session, domestic steel brands are selling at around 13,850 - 15,300 VND/kg. Among them, Pomina steel has the highest price in the country at 15,300 VND/kg. Other brands recorded prices mainly around 14,000 VND/kg.
THE EXPECTATION OF ESCAPE FROM THE "EXTREME TRAGEDY"
According to Vietnam Steel Corporation (VNSTEEL), 2023 is a difficult year for Vietnam's steel industry due to impacts from both inside and outside. However, in 2024, it is likely that Vietnam's steel demand will recover and grow equivalent to or higher than economic growth (plan 6 - 6.5%).
The recovery of the steel industry is expected to be more evident in the last 6 months of 2024 when bottlenecks in the real estate industry in Vietnam are gradually removed. VNSTEEL has set a target for finished steel product output in 2024 of 3.095 million tons. In more favorable market conditions, factories in the corporation system will maximize capacity to serve the needs of customers and the market.
With the same opinion, the General Statistics Office forecasts that steel demand and steel prices may increase again in the coming months when public investment is promoted and the spillover effect on manufacturing industries may be modest. Therefore, steel industry enterprises need to continue to closely follow the market, forecast supply and demand to take advantage of opportunities, reduce costs, lower product prices, and improve production and business efficiency.
Recently, in the steel industry outlook report for 2024, SSI Securities Joint Stock Company (SSI Research) said that the profits of steel companies are forecast to achieve high growth in 2024 thanks to improved consumption output and recovery in steel prices.
Accordingly, SSI Research forecasts that total steel consumption in 2024 will recover by more than 6% compared to the same period in 2023. In particular, domestic consumption will reach a growth rate of nearly 7%.
"The domestic channel showed the first signs of recovery at the end of 2023 when consumption volume from September to November increased by 13%, after decreasing by 20% over the same period in the first 8 months of 2023", analysis group SSI Research commented.
Steel consumption in 2024 will be supported by the macroeconomic situation and a better real estate market. In the previous cycle, construction steel consumption in 2013 increased by about 3% compared to the bottom in 2012.
According to SSI Research, steel companies' profits may have bottomed out in 2023 and will recover in the next 2-3 years. This securities company expects the profits of steel companies to achieve high growth in 2024 from the low base of 2023 thanks to improved consumption output, especially of Hoa Phat Group and Hoa Sen Group.
Gross profit margin of steel companies (Source: SSI Research)
Specifically, SSI Research forecasts that Hoa Phat Group's profit will recover by 80% in 2024 thanks to both sales volume and gross profit margin improving. The company's sales volume is expected to increase by 11% in 2024.
For Hoa Sen Group, SSI Research expects profits to recover strongly in 2024 with an increase of more than 20 times compared to the low base level set in 2023, the lowest level since 2006. At the same time, the domestic market may recover better than the export channel in 2024.
Ha Diem HSV