Tuesday, July 23,2024 - 14:50 GMT+7  Việt Nam EngLish 

Vietnam steel market update: Steel industry to reduce carbon emissions, aiming for neutrality by 2050 

 Saturday, September 30,2023

AsemconnectVietnam - According to a report by the association, green development has become a global and national goal, a necessity in the case of Việt Nam as the Southeast Asian country is among some of the most affected by the adverse effects of climate change.

Innovation is to play a key part in Việt Nam steel industry's objective to cut down its carbon footprint, according to Nghiêm Xuân Đa, Chairman of the Vietnam Steel Association (VSA) and CEO of Vietnam Steel Company (VNSteel) during a seminar exhibition on green development organised by the association in Hà Nội on Wednesday.
Đa said the industry remains one of the main contributors to carbon emissions and consumers of fossil fuel and must lead at the forefront in the country's effort towards sustainable and green development.
Positive signals from Hoa Phat
A distinct positive signal comes from the revenue of Vietnam's steel industry titan - Hoa Phat. Specifically, in Q2/2023, the conglomerate's revenue reached VND 29.800 trillion (equivalent to 1.2 billion USD), marking a 21% decrease compared to the same period last year. However, the after-tax profit for Q2 is tripling from Q1 with 1.448 trillion VND (over 59 million USD).
Hoa Phat is currently regarded as the leading enterprise within the scope of Vietnam's steel industry, possessing more than seven high-furnace steel mills. Depending on the crude steel capacity of 8.5 million tons per year, Hoa Phat has been at the forefront of the construction steel segment in the Vietnamese steel market for many years. The positive export shift also contributed to the enterprise's recovery in the recent Q2, especially in the HRC segment in significant markets, including Europe and the ASEAN region. As such, Hoa Phat's business prospects are also seen as a hope for many other Vietnamese steel companies.
Vietnamese enterprises simultaneously reduce steel inventory
Until now, all Vietnamese steel enterprises have announced their business performance in the second quarter of 2023, and an overview of the domestic steel industry in the first half of 2023 is gradually revealed. According to statistics, the total Vietnamese steel inventory on June 30 was only about VND 61 thousand billion dong ( ~ 2,5 billion USD). Compared to the inventory in the first quarter, the current inventory has sharply decreased by 7000 billion VND (289 million USD). This is also the lowest since the first quarter of 2021.
In fact, after the period when inventories peaked at more than 110,000 tons in the second quarter of 2022, the domestic steel enterprises actively reduced their stockpiles. The top three steel companies showed a substantial decrease in inventories, including Hoa Phat, Nam Kim, and Hoa Sen with a decrease of 2300 billion dong, 1250 billion dong, and 1150 billion dong.
Specifically, Hoa Phat reported that the steel inventory on June 30 was only 32,261 billion VND, a slight decrease of 7% compared to the first quarter of 2023 and 50% lower than last year. Similarly at Nam Kim, steel inventory was recorded at VND 5,380 billion and decreased by nearly 27% compared to the first quarter of 2023. Inventories at Hoa Sen also showed a sign of decrease to VND 6,200 billion, down 10% compared to the end of Q1/2023 and halving against the end of Q2 last year.
Beyond the top 3 giants in the steel industry, the inventory of most other steel companies such as VNSteel, Tisco, SMC, etc. is downward. It is known that the increasing steel price trend in the first 3 months of the year has partly made businesses reduce the provision for devaluation of inventories. However, the price trend showed signs of reversal, and it continued to decrease since April, which again has caused many steel enterprises to be under pressure to prevent the devaluation of inventories soon.
The prospects for recovery of the Vietnam steel industry
Although currently, the amount of steel inventory at enterprises has decreased, this data does not precisely reflect the situation of domestic steel consumption. Weak demand has remained unsolved since the beginning of the year, especially when the real estate market still has not had many remarkable projects.
According to information from the Vietnam Steel Association (VSA), in the first half of this year, sales of finished steel products reached nearly 12.5 million tons and decreased by 17.5% over the same period in 2022. The total 80% of steel sources consumed in the domestic market come from HRC and construction steel. The rest are galvanized steel and steel pipes. The weak demand for steel with the surplus of goods at factories has led businesses to lower prices to stimulate consumption continuously.
Vietnam's export market in the first half of 2023 is considered to be unexpected. The cause is directly due to weak consumption demand and competitive pressure from Chinese steel sources. HRC and galvanized steel products are still the primary sources of export goods. However, the sharp decline in steel demand in many places worldwide has led to a decrease in Vietnam's export steel output. Besides, domestic enterprises also have to compete for cheap steel products from Chinese enterprises when this country continuously lowers export steel prices.
In the gloomy context of the current civil construction projects in the real estate market, many steel enterprises expect public investment projects to stimulate the demand. Assessing the prospect of steel recovery, VSA believes that the steel demand can recover significantly and have strong transitions in the period 2023 - 2024. Thereby the recovery will help the profit margins of businesses in the industry improve positively.
Source: VNA



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