What’s going on?

• The demand for Steel in Vietnam is expected to grow with positive macroeconomics signals, capital outflows from China, and newly-signed free trade agreements.
• Along with that, competition appears to be sharper with the strong growth of Hoa Phat and the shrinking of Pomina and Vinakyoei.

The rising demand drivers

Volume

Steel consumption has recovered strongly in November after a decline in October, with the growth of the 3 main steel segments: construction steel, galvanized steel, steel pipes.

• Construction steel:
  • Accelerated progress of infrastructure projects, especially key projects such as the North-South expressway in the East, Trung Luong – My Thuan – Can Tho expressway, and Long Thanh international airport.
  • The roadmap of spending VND 700 trillion of public investment capital is also the main driver for the steel industry this year.
  • With effective control of Covid, along with geographical location advantages, cheap labor costs, etc., Vietnam is attracting strong FDI inflows. This strongly grows investments in factories and industrial zones, leading to an increase in construction steel demand. 
• Galvanized steel: thanks to favorable trade agreements:
  • Material imports: CPTPP member countries are the main sources of raw materials for steel production in Vietnam. E.g:
    • Australia is the main supplier of coal and ore, accounting for 25.7% and 22.9% of the total import turnover of Vietnam, respectively.
    • >50% of steel scrap imported is also from CPTPP countries.
  • Export destinations:
    • ASEAN countries and the US are currently the two leading markets for Vietnam’s steel exports.
    • In the context of rising protectionism, the diversion of exports and expansion to other markets is necessary. In particular, EVFTA is expected to create opportunities to export to the EU market.
• Steel pipes: rising demand from civil and industrial construction activities domestically

Price

Steel prices also see an upward trend:

• Due to rising prices, agencies tend to accumulate more in the short term, driving hot-rolled coil price to $700 /tonne from the $530 in early November.
• Due to higher raw material prices, construction steel price is forecasted to increase soon.

Fiercer competition

Hoa Phat dominating in the South region

• The consumption volume of Hoa Phat (HPG) in the Southern market has increased by 77% YoY thanks to abundant output at competitive prices from Dung Quat Steel Complex.
• In contrast, sales of Pomina and Vinakyoei fell 24% and 10% respectively in the South, although Posco SS’s leaving the rebar segment has left considerable room for other manufacturers.

The game goes on

• The level of competition is expected to continue increasing in 2021 when Pomina has put into operation the 1-million-tonne steel plant in the second half of 2020.

Content source: 
1. Tri Tuc. (2020) Ngành thép tăng tốc, cạnh tranh giữa các doanh nghiệp ngày một rõ nét. CafeF. Available at: https://cafef.vn/nganh-thep-tang-toc-canh-tranh-giua-cac-doanh-nghiep-ngay-mot-ro-net-20201225152622311.chn [Accessed on December 26, 2020]