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Opportunities and challenges for steel enterprises

19/08/2022

Over the past 3 months, steel prices have continuously decreased with the highest price reduction of more than 5 million VND/ton. With the steel price continuing to decline and the demand for this item showing no signs of recovering, the prospect of the steel industry is forecasted to continue to be difficult in the coming time.

Impact on businesses

According to Deputy Director of the Import-Export Department, Ministry of Industry and Trade Nguyen Cam Trang, over the past time, steel enterprises have constantly diversified export products, trying to develop their brands to the world market. Enterprises have also actively seized opportunities from free trade agreements (FTAs) such as CPTPP, EVFTA…, putting the steel industry in the top industry group in terms of taking advantage of tariff preferences.

In 2021, Vietnam’s steel industry has achieved a miracle when it first entered the list of products with export turnover of over 10 billion USD, making our country a super steel exporter after many years of trade deficit.

Data from the General Statistics Office shows that, in 2021, the export output of iron and steel of all kinds will reach 13,096 million tons, the export turnover will be 11.795 billion USD, up 123.4% and the import will reach 11,523 billion USD, up 42 .6% over the same period in 2020; trade surplus reached 272 million USD.

Vietnam’s steel products have been exported to more than 30 markets around the world. Particularly, the export of construction steel in 2021 has increased by 1.5 times compared to the same period in 2020, equivalent to about 2.2 million tons.

The Vietnam Steel Association (VSA) said that in the first 7 months of the year, our country’s finished steel output reached 18.825 million tons, down 3.7% over the same period in 2021; finished steel sales reached 17.1 million tons, down 1.2% over the same period in 2021, of which steel exports reached 4.146 million tons, down 1.5% over the same period last year.

Vietnam’s steel products have been exported to more than 30 markets around the world.

Recently, many steel manufacturing and trading enterprises, especially some “big” men such as Southern steel, Vietnamese steel, Thu Duc steel, Dong A steel sheet, Hoa Sen steel sheet, etc., constantly complain of difficulty, the more they produce, the better. losses. For example, like Southern Steel One Member Limited Liability Company, currently producing about 60% of capacity. Inventories amount to nearly 100 thousand tons of steel of all kinds, causing difficulties for businesses, greatly affecting jobs, lives and incomes of workers. In the first 6 months of the year, Hoa Phat recorded 82,118 billion dong in revenue and 12,229 billion dong in profit after tax, respectively down 27% compared to the same period last year, thereby completing 46% of the year plan; Thu Duc Steel recorded revenue of 1,112 billion dong, down 11.5% over the same period and profit after tax reached 6.1 billion dong, down 87.1% over the same period….

The main reason affecting the difficulties and losses of the steel industry, according to economic experts, is because of the influence of the Russia-Ukraine tension, so the global fuel price crisis has increased. In particular, fluctuations in the price of coal – one of the main raw materials for the production of iron and steel by blast furnace technology continuously increased, leading to a sharp increase in the production cost of steel products.

For enterprises using steel scrap, scrap prices also tend to increase continuously, currently scrap prices are fluctuating around 600 USD/ton. Over the past 3 months, steel prices have continuously decreased with the highest price reduction of more than 5 million VND/ton, depending on brand, steel type and region. The selling price of finished steel in the southern region is trading at only about 15 to 16 million VND/ton; The North is about 14 to 15 million VND/ton. Thus, the difference in the price of input materials is larger than the price of finished steel, causing a sharp decrease in the profit of the enterprise.

The reason for the continuous decline in steel prices in recent years is due to the sharp drop in input material prices, along with abundant supply and large inventories, forcing businesses to lower product prices to stimulate consumer demand. push inventory. Many experts believe that the domestic construction steel price will continue to decrease from now until the end of the year.

Another reason to mention is that large construction projects in the country are facing many difficulties due to lack of capital, mainly due to the impact of higher raw material prices compared to the initial estimate; Along with the disbursement of public investment capital is too slow, banks are tightening lending… These basic factors lead to the demand for “secret” output, and the output is decreasing day by day, not only affecting the output alone. not only for the steel industry but also for the whole economy.

According to VSA, the steel industry is at the heart of the global economy. Normally, the downward trend in steel and raw material prices in recent months will be welcomed by consumers. However, that decline in steel demand is actually the result of a trend of fears about a global economic recession.

Oppotunity and challenge

Currently, the world economy is gradually recovering, which will also push up steel demand. Domestically, the economic and social recovery and development program is being implemented, especially promoting disbursement of public investment, which will increase demand, thereby creating momentum for the steel industry to recover.

Deputy Director of the Import-Export Department said, with 15 FTAs ​​signed and taken effect, it is opening up great market opportunities for the steel industry. In addition, the system of overseas deals has also actively supported businesses in information connection and trade to boost exports; Accompanying enterprises to effectively respond to trade remedies.

According to VSA Chairman Nghiem Xuan Da, the steel industry mostly imports raw materials for production, from coal, iron ore, and scrap steel. Over the past time, the State has opened up, creating conditions for businesses to access raw materials to stabilize production, the import control process has improved in a more favorable direction for businesses. VSA thinks that the steel market in the second half of the year will be more difficult when it is forecast that the domestic construction steel price will continue to decrease, while the profit of the steel export segment is not as good as before.

The domestic steel industry continues to face challenges due to the stagnation of steel-using manufacturing industries such as construction industry, infrastructure… and competitive pressure from increasing supply in the country and some neighboring countries. close.

It is noteworthy that the steel industry has always faced trade defense barriers from many countries, significantly affecting export turnover and markets. This has had a significant impact on dominating the market, increasing market share as well as export turnover.

The report of Mirae Asset Vietnam Securities Joint Stock Company (MASVN) also points out four risks that the steel industry may face from now until the end of the year. That is, raw material price fluctuations; inflation risks causing construction demand to decrease; risks about Chinese manufacturers increasing exports and policy risks.

According to experts, to be able to take advantage of opportunities, the steel industry needs to overcome internal difficulties. In particular, it is necessary to develop and perfect the production chain, increase added value, and innovate. Enterprises must improve technology, designs, diversify export products, and standardize the supply of raw materials to meet the requirements of the import market. Enterprises also need to actively seek opportunities from FTAs ​​on tariff reduction, meeting rules of origin; strictly comply with the regulations of the import market; Searching for information, adjusting production and business to suit the market. Businesses also need to cooperate, unite, compete in a healthy manner and further improve their defense capabilities.

The State needs to have a long-term development strategy to promote investment, including policies to support investment, human resource development, science and technology. The Ministry of Industry and Trade has reported to the Government on the proposal to develop a Strategy to develop the steel industry to 2030, with a vision to 2050. It is expected that this will be an important premise for a long-term policy to promote the development of the steel industry.

Source Tap chi Co khi

Let’s welcome the return of MTA Vietnam 2023 – The leading exhibition on precision mechanics and metal processing industry in the North. Here, the latest products, solutions and technologies are introduced by exhibitors, creating more opportunities to approach customers and potential suppliers. The exhibition is also a platform to connect and communicate between regional and international businesses in the industry to update the latest industry trends. Beyond that, there will be presentations from leading industry experts, from which you can update industry knowledge and enhance experience at the exhibition.
 
MTA VIETNAM 2023 EXHIBITION OVERVIEW
 
Exhibition date: July 04 – 07, 2023    Opening hours: 9:00 – 17:00 daily
 
Venue: SECC – Saigon Exhibition and Convention Center, 799 Nguyen Van Linh, Tan Phu, Quan 7, Ho Chi Minh City, Vietnam
 
Contact Information: Mr. Kingsley
 
Tel: +84 28 3622 2588
 
Email: [email protected]
 
Website: www.mtavietnam.com
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