Steel industry 2020: The battle for market share and the breakthrough of enterprises

In particular, the prices of some steel production materials tend to increase due to supply limitations. These difficulties are causing Vietnam’s steel industry to forecast no growth in 2020. Not only struggling because of the epidemic, exported steel also faces a series of risks of trade defense lawsuits when entering the market. world, causing Vietnam’s steel industry to face double difficulties. 

Steel consumption decelerates, and exports are difficult

Following the fluctuations from 2019, the steel industry market in 2020 entered a period of instability and refinement. Raw steel prices still fluctuate unpredictably, steel exports face difficulties due to trade tensions and the rise of protectionism, the domestic market faces fierce competition, and the real estate and construction markets cool down…

Therefore, production and consumption of finished steel products in 2020 will still increase, but the growth rate has decreased much compared to the previous year. According to data from the Vietnam Steel Association (VSA), cumulatively in the 11 months of 2019, steel production increased by 4.1% and sales increased by 6.3% while in 2018 recorded increases of 16.2% and 16.2% respectively. 23.6%. Of which, steel exports recorded 4.2 million tons, down 2.6% over the same period.

Ngai Cau believes that the growth rate of Vietnam’s steel industry consumption in the next 5 years will be at 9%/year (base scenario). Historical data over the past 10 years has also clearly shown the correlation between GDP growth and construction steel consumption growth with an increase rate of about 1.68 times higher during good growth periods of the real estate market. This number is forecast to decrease by 1.4 times in the next 5 years. However, we think that the steel industry still has a lot of potential in the long term. The reason is that Vietnam’s orientation is still towards industrial production activities, the need for infrastructure construction is still very large with major projects being considered for implementation such as highways and northern railways. South, North, South, urban elevated routes, the subway system,…

Selling prices do not decrease too much, businesses can accelerate

Last year, steel industry enterprises experienced a fierce battle for market share and a race to reduce costs, forcing many businesses to accept a significant decline in profits or even negative growth.

In 2020, total demand is forecast to increase weakly but capacity increases sharply, making competition even fiercer. However, SSI Research assesses that the pressure to reduce steel prices is not too great because the profit margin before interest, depreciation and tax (EBITDA) of many manufacturers is close to 0. Smaller and inefficient companies have You can choose to cut production output when revenue cannot offset costs. Large companies can take advantage of this opportunity to accelerate market share thanks to their existing advantages in production costs, transportation and distribution systems.

The export market for steel of all types in the six months of 2020 also continued to decline sharply, reaching only 2.28 million tons, down 19.3% over the same period last year. The recovery of the export market depends greatly on the ability of Southeast Asian countries to control the epidemic, which accounts for 60% of total steel exports and 57.8% of total export turnover. industry today. But VSA also recommends that businesses need to be careful in controlling prefabricated steel products exported to the US market when this product has been included in the early warning area in the field of trade defense. Because the trade defense trend will continue to be used by markets with many products, especially with steel. Therefore, when businesses themselves approach markets such as Europe and the US, in addition to meeting requirements on standards, techniques, and origin, they also need to pay more attention to trade defense regulations to Prepare and receive lawsuits.

However, to revive the manufacturing industries, the Vietnamese Government, with the determination to both repel the epidemic and develop the economy, increased investment capital from the state budget in August and the first eight months of 2020. increased by 45.4% and 30.4% respectively over the same period last year. This is the highest increase in the 5-year period (2016-2020).

Thanks to that, in August 2020, steel production of all types reached more than 2.34 million tons, an increase of 11.36% compared to the previous month; Steel sales of all types reached more than 2.07 million tons, an increase of 5.88% compared to July 2020; Steel exports of all kinds reached 462,138 tons, up 8.81% over the previous month.

Steel consumption in the first 8 months of 2020 (tons)

Steel consumption in August 2020 (tons)

Currently, the average domestic steel selling price is about 11,000-11,050 VND/kg depending on each product type and each specific business. According to VSA, businesses have fierce competition to maintain market share or develop more market share, competing in both construction and civil sectors. Therefore, domestic construction steel prices have not adjusted much despite rising raw material prices…

Businesses need to change to thrive

In 2021, it is predicted that there will still be many difficulties for the steel industry as manufacturing enterprises continuously reduce prices to gain market share. In particular, steel imported from China at cheap prices is greatly affecting domestic consumption. The protectionist trend in the international market still shows no signs of slowing down, and the domestic real estate and construction markets have not shown signs of improvement. But this is also a “test” for steel industry enterprises to restructure, improve competitiveness and gain market share. In addition, although steel exports are forecast to remain difficult, the Vietnam – EU Free Trade Agreement (EVFTA) taking effect from August 1 is expected to help Vietnamese steel products appear. clearer in this market. Enterprises themselves need to be carefully prepared to receive opportunities as well as meet committed technical standards; Understand the market’s legal framework and technical barriers to be more proactive in exporting, avoiding the trouble of trade defense lawsuits.

Vietnamese steel industry enterprises need to take appropriate steps, proactively approach and increase competitiveness through improving product quality, expanding markets, and continuing to review and reevaluate sales policies. products and distribution system to make appropriate adjustments, ensuring increased consumption output, building a stable distribution system, and long-term development.

Construction steel consumption (tons)

Along with that, improving management and administration capacity and improving technology in steel production are steps that need to be focused on, thereby helping the steel industry have a breakthrough and overcome difficulties and challenges. consciousness is present. It is necessary to quickly restructure production and business according to market signals, increase competitiveness through cost savings, improve enterprise management capacity to lower costs, improve product quality, and find more export market to limit damage.