Steel industry: Positive signs from export

Coated steel export could remain strong in 2H2021

Export to boost total steel sales 

In 6M2021, Vietnam’s steel industry (including construction, coated steel, and steel pipes) produced 9.7 million tons of steel, sold 9.1 million tons, of which 2.4 million tons were exported, increasing by 20.1%, 17.1%, and 72.5% YoY respectively. 

Total coated steel consumption grew by 43.7% YoY in 1H, of which export volume increased by 133% YoY and accounted for 57.5% of total sales. Coated steel consumption decreased by 5.4% YoY locally due to weak demand and attractive opportunities overseas. Domestic construction steel sales volume rose by only 5.9% in 1H as the construction industry grew only by 5.6%.

Export remains strong in 2H

Sales volume reached 1.33 million tons in 2Q, increasing by 45% YoY. However, domestic demand decreased in the last two months. Export has been playing a key role as it accounted for 56% of total sales volume in 2Q2021, which was only 33% in 2Q2020. 

VDSC said, domestic demand would remain weak in 3Q, and the recovery in 4Q will depend on the pandemic control. However, export activities are still strong in 2H as many large coated steel manufacturers received sufficient orders for production until November 2021. Hence, Hoa Sen Group (HSG) and Nam Kim Steel JSC (NKG) can run their factories at full capacity in 2021. Besides, export’s gross margin can be good in 3Q as the steel price gap between Europe, North America, and Vietnam has been increasing. The robust demand from Europe and North America, coupled with favorable trade policies in Europe, can support Vietnam’s coated steel producers in 1H2022.

Domestic demand is still low

In the construction segment, domestic demand was weak due to the COVID-19 pandemic, rainy season, and relatively high selling price. Sales volume in 2Q grew by 7% YoY, but it decreased by 18% YoY in June. This can be explained by the negative impact of measures to control the pandemic. Although steel prices decreased in July by roughly 10%, the demand was still low. For 3Q, VDSC forecasted the domestic demand would remain weak due to the increasing COVID-19 cases, and seasonality caused by the rainy weather. Applying Directive No 16/TTG in the South is necessary to control the pandemic, but construction activities are likely to slow down.

In the steel pipe segment, the consumption in 2Q reached 634,000 tons, down 2% YoY. Noticeably, the sales volume has dropped to 153,700 tons in June, down 33% YoY. Due to the large portion of the domestic market, steel pipe sales were affected by the pandemic and the rainy season.