The domestic steel market receives signs of recovery
In the 2022-2023 period, Vietnam’s steel industry witnessed a sharp decline due to facing a series of challenges such as high input material prices and declining demand. However, from the end of 2023 to the beginning of 2024, the steel industry received initial signs of recovery, including improved domestic demand and a more optimistic picture of the world steel industry.
According to statistics from the Vietnam Steel Association (VSA), in the first quarter of this year alone, Vietnam’s finished steel production reached 7.06 million tonnes, up 5.5% over the same period last year, while consumption reached 6.68 million tons, up 10%. Exports also recorded good growth, reaching an increase of 36% over the same period at 2.25 million tonnes. Domestic steel prices also recovered from a 3-year low and continuously increased during this period.
From November last year to March this year, steel prices in the north experienced a total of 6 consecutive price increases. The price of CB240 coil steel increased to 14.34 million VND/tonne, an increase of about 910,000 VND after 6 adjustments. The price of D10 CB300 rebar also increased to 14.53 million VND/tonne, an increase of about 790,000 VND compared to the end of November.
In the second and third quarters, the steel industry became quiet again, but in general, it still maintained a more stable growth rate than the same period last year. Notably, at the end of the third quarter and the beginning of the fourth quarter, the steel industry received important support from the “heat” of the Chinese steel industry.
At this time, steel prices here have recovered from a multi-year low and even climbed to a 3-month peak. The price of raw materials for steel production, iron ore, has also continuously increased.
Accordingly, steel prices in the domestic market have also started to increase again since the end of September. After many consecutive adjustments, steel prices in Vietnam are currently stable at around 14 million VND/ton.
Thus, from a positive perspective, the steel industry has now passed the most difficult period and is gradually restoring stability. Many businesses have witnessed improvements in consumption demand, revenue and profit margins, cheap inventories have been gradually cleared, and steel prices have gradually recovered.
However, it is not yet possible to confirm that the steel industry has completely recovered and is about to witness long strides of growth, as this industry is still facing many difficulties and challenges.
The steel industry still faces many “thorns”
Assessing the prospects of the steel industry in the coming time, Duong Duc Quang, Deputy General Director of the Vietnam Commodity Exchange (MXV), commented that the Vietnamese steel industry has shown many signs of recovery this year and is gradually stabilising after a long period of decline. However, these are only initial signs of improvement, this recovery is still uncertain and unsustainable because consumption demand has not really broken through.
The recovery data is still mainly compared based on the low base level of last year. In addition, the world steel industry is still facing many difficulties due to the negative impact of the Chinese steel crisis. Therefore, in the short term, the steel industry cannot break through to a new growth phase and is expected to continue to be sluggish, at least in the first half of next year.
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Duong Duc Quang, Deputy General Director of the Vietnam Commodity Exchange. |
Indeed, despite its efforts to recover, the steel industry still faces many challenges from both the domestic and international markets.
First, the recovery of the domestic steel industry this year is still partly due to the low base level of 2023, rather than a clear improvement in consumption demand.
In 2023, Vietnam’s steel industry witnessed a sharp decline due to the frozen real estate market, reduced construction projects, and also the impact of the weakening of the Chinese industry. The sharp decline in demand has caused businesses to continuously lower steel prices, most notably a series of 19 consecutive price cuts lasting until November, bringing domestic steel prices to a 3-year low. Meanwhile, considering the context of the steel industry this year, compared to the first quarter — when steel demand and production recorded good growth — the second and third quarters were much quieter.
Second, the steel industry is greatly influenced by the Chinese steel industry. Currently, the country is struggling with a steel surplus crisis and its giant industry is on the decline, with steel prices continuously falling to multi-year lows. Therefore, Vietnam can hardly avoid negative impacts.
Moreover, the country's continuous promotion of cheap steel exports can put domestic enterprises at risk of losing market share.
Third, export activities face many difficulties because enterprises face trade defence lawsuits, anti-dumping, anti-subsidy, and self-defence technical barriers set up by import markets.
According to statistics, by the end of October 2024, out of a total of 267 foreign trade defence investigations against Vietnam, about 30% of the cases are related to steel products.
It is worth mentioning that these lawsuits mostly occurred in Vietnam's main steel export markets, such as the US, the European Union (EU), Australia, India, etc.
With these challenges, the steel industry is unlikely to achieve a strong breakthrough in the short term and is expected to continue to maintain a stagnant state, at least in the first half of next year. However, in terms of opportunities, this can be considered a time for the Vietnamese steel industry to make efforts to improve and seek a more sustainable direction in the future.
