According to Mirae Asset Security (Mirae Asset), Vietnam’s steel industry in the second half of 2021 is still attractive, with a valuation 20 per cent lower than the region.
Mirae Asset estimates that the hot-rolled coil (HRC) segment has grown the most with the additional capacity of 3.5 million tonnes from the Dung Quat Hoa Phat project (DQCP).
In April, the strong demand from both export and domestic markets helped the steel industry’s output grow faster than expected, reaching the standard of 10.5 million tonnes, equivalent to an increase of 38.3 per cent over the same period. Besides, export products reached more than 3.8 million tonnes with an increase of 88 per cent in value to $2.67 billion.
Vietnam’s steel production is expected to grow strongly, reaching 30.6 million tonnes, 6 per cent higher than the previous forecast.
Vietnam’s total output of hot-rolled and cold-rolled coils (HRC and CRC) of the whole year is expected to reach 11.5 million tonnes, up 30 per cent on-year. Meanwhile, steel pipes and galvanised steel sheets in 2021 would reach 11.23 million, 2.73 million, and 5.14 million tonnes, respectively.
However, the dropin iron ore prices, especially HRC, in the third quarter, would first and directly affect steel and galvanised steel companies.
Additionally, there are risks of a slowdown of the domestic construction market due to escalating steel prices as this material accounts for about 6.2 per cent of construction expenses.
Mirae Asset believes that the supercycle of construction material price, which is led by steel, can cause the construction industry to either grow very slightly or decline in the worst case.
It emphasised that a rise in construction steel prices above VND17.2 million ($747.83) a tonne will be good in the short term but in the long term, there will be certain impacts on the steel industry.
In fact, many businesses have decided to postpone construction until they can offsetthe cost of materials, which can slow down progress by 6-18 months.
In the first quarter, steel companies continued to sharply increase their output and profit thanks to large demand from both domestic and export markets. The net profit for the first three months of Hoa Sen Group, Nam Kim Steel JSC, and Hoa Phat Group increased by 216, 668, and 204 per cent, respectively.
This was followed by strong rises in stock prices since the beginning of 2021, reaching 76, 100, and 103 per cent, respectively. With the current HRC price base at over $700 a tonne, Mirae Asset believes that the net profit of the entire steel industry in 2021 will be positive.
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