Overview of the steel industry in 2020
Assessing the overall steel industry in 2020, analysts believe that increased competitiveness in the coming time will be a test for steel industry enterprises in terms of market share, ability to maintain profits, and product lines. money after the instability that occurred.
Double difficulties of the steel industry
The COVID-19 pandemic has hit many parts of the globe in the past few weeks, with economic pressures and lack of downstream demand leading to the largest series of production cuts and shutdowns since 2015.
The domestic steel industry continues to face challenges due to the stagnation of manufacturing industries using steel for construction, infrastructure, automobiles, motorbikes… and competitive pressure from increased domestic supply…
In the context of a gloomy global market in general, domestic production and sales of steel products in the first quarter of 2020 had negative growth rates of 6% and 12.4% respectively compared to the same period in 2019. However, excluding the growth of hot rolled coil steel (HRC), production decreased by 4% while sales decreased by 12% compared to the same period in 2019.
Specifically, steel production of all kinds reached more than 5,728,408 tons (down 6%), steel sales of all kinds reached 5,034,580 tons (down 12.4%), steel exports of all kinds reached 1,024,908 tons (down 21.3%) compared to the same period in the first quarter of 2019.
For construction steel, the number of goods sold in the first quarter of 2020 was 15% lower than the same period in 2019, of which exports decreased by 14% and domestic consumption decreased by 16%. In March 2020, prices of raw materials for steel production decreased, such as iron ore decreased by 6 USD/ton; Steel scrap price decreased by about 30 – 35 USD/ton compared to early February 2020; Southeast Asian steel billet prices dropped sharply by 40-50 USD/ton. Domestic steel selling prices are currently on average around 11,000 – 11,400 VND/kg depending on each product type and each specific business.
Growth after social upheavals
Despite the impact of the COVID-19 epidemic affecting many manufacturing industries from the beginning of the year until now, the domestic steel production industry after 10 months is still maintaining a positive growth rate.
The construction industry grew by 4.5% in the first 6 months of 2020, significantly higher than the GDP growth, of only 1.8%. Domestic galvanized steel consumption grew by 6.5%, while domestic construction steel and steel pipe consumption decreased by 8.1% and 6.8%, respectively.
The severe impact of the pandemic on the steel industry is shown through the numbers in the first 6 months of the year such as the entire industry (including construction steel, galvanized steel, and steel pipes) produced 8.1 million tons of steel, consuming consumed 7.8 million tons, of which 1.4 million tons were exported, down 6.4%, 7.0%, and 12.8% respectively over the same period last year.
Construction steel market share chart. Source: Vietnam Steel Association, compiled by VDSC
Report of the Vietnam Steel Association (VSA) in October 2020, crude steel output was estimated at 3,371,000 tons, an increase of 11% over the same period; rolled steel is estimated at 800,000 tons, up 23.6% over the same period; Steel bars and angle steel are estimated at 922,000 tons, down 0.1% over the same period. In general, for the first 10 months of 2020, crude iron and steel production output; rolled steel; Bar steel and angle steel increased by 0.1 respectively; 5.3% and 7.6% over the same period in 2019.
Notably, despite its dependence on exports, galvanized steel consumption only decreased by 1.2% over the same period last year, a significantly lower decrease than the consumption of steel pipes and construction steel.
In the second quarter, steel consumption recovered significantly, although export activities still faced many difficulties. Domestic construction steel sales increased by 13.2% compared to the previous quarter, and equivalent to the same period last year.
Domestic steel pipe consumption grew well in the second quarter, increasing by 43.6% over the previous quarter and 6.5% over the same period. In contrast, the export output of construction steel, galvanized steel, and steel pipes continued to decrease by 9.8%, 7.3%, and 29.9% over the same period, respectively.
Waiting for innovation next time
Although the COVID-19 epidemic creates many difficulties, it is also a “test” for businesses to restructure, improve competitiveness, and gain market share. In the second half of 2020, the steel industry is forecast to continue to face many difficulties and challenges because protectionist trends in the international market and domestic real estate and construction markets have not shown signs of improvement. In addition, the source of raw materials for the steel industry’s production was interrupted. However, opportunities also arise when in the domestic market, the Government is promoting more construction activities after lifting the COVID-19 shutdown.
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 have a clearer presence in the market. This. The opportunity for the Vietnamese steel industry to export to the EU market is very large, businesses need to be carefully prepared to receive this opportunity.
In the context of increasing competitive pressure, the trend of gaining market share in the construction steel segment may accelerate in favor of large companies with significant advantages in production and transportation costs. and distribution system.
Besides, in the context of protectionist trends worldwide, Vietnam may extend protective tariffs for long steel next year. The current tax rate is 17.3% for long steel billet and 10.9% for construction steel. It is worth noting that even in the case that the tax is not extended, the pressure from China will not increase significantly, because the current steel price in China is not much different from the steel price in Vietnam.
A slowing Chinese economy could negatively affect steel demand in the world’s largest manufacturing companies, and have an indirect impact on domestic steel prices in Vietnam. According to the Vietnam Steel Association, steel demand in China in 2020 is estimated to increase by 1%, much lower than the estimated growth of 7.8% in 2019.
As a result, total world steel demand growth is estimated to reach 1.7% in 2020, down from 3.9% in 2019. Capacity increased significantly while demand growth slowed, especially construction steel, can increase competitive pressure on the domestic market, and make domestic steel prices more volatile.