Public investment has not been really positive and the gloomy real estate market has caused steel prices to continuously adjust downward along with weak consumption, making the operations of many businesses in this industry difficult. However, signs of recovery gradually appear in both the domestic and export markets, and it is expected that steel enterprises will "escape" losses when entering 2024.
Business results for the third quarter of 2023 show that most steel industry enterprises are still at a loss. Particularly, the two "big guys", Hoa Phat Group Joint Stock Company (HPG) of billionaire Tran Dinh Long or Hoa Sen Group (HSG) of "tycoon" Le Phuoc Vu, recorded profitable business results.
Steel prices dropped sharply, businesses "burden" losses
From March 2023 until now, steel prices have had 19 adjustments, a total of more than 14%, currently fluctuating around 13.7 million VND/ton, the lowest in the past 3 years.
According to the Vietnam Steel Association (VSA), the reason domestic steel prices are continuously decreasing is due to slow consumption demand, the number of civil projects being started is small, public investment activities are gradually being promoted but not enough to help the steel market better. Meanwhile, domestic manufacturers still have to compete with cheap steel from China when this country continuously lowers export prices.
In the first 9 months of the year, steel prices continuously adjusted downward along with weak consumption, making the operations of many businesses in this industry difficult.
Reasons affecting the business results of many steel industry enterprises. Typically, in the third quarter of 2023, a series of VNSteel businesses include: Vicasa Steel Joint Stock Company - VNSteel (code: VCA), Thu Duc Steel - VNSteel (code: TDS), Nha Be Steel - VNSteel (code: TNB ), Thai Nguyen Iron and Steel (code: TIS) reported after-tax losses of nearly 3 billion VND, 491 million VND, 2.7 billion VND, 58.5 billion VND respectively. Only TP Metal. Ho Chi Minh City - VNSteel (code: HMC) is a rare enterprise in the group that reported a profit in the third quarter even though the profit after tax was only 2 billion VND.
The "club" of big losses in the steel industry also includes SMC Trading Investment Joint Stock Company (code: SMC) which recorded a post-tax loss of 178 billion VND in the third quarter. Accumulated in the first 9 months of 2023, SMC lost 585 billion VND, more than 6 times higher than the same period.
Similarly, Thai Nguyen Iron and Steel - Tisco (code: TIS) also recorded third quarter gross profit reaching 33.8 billion VND, down 24% over the same period. Accumulated loss after tax in the first 9 months of 2023 is 194 billion VND, while the same period last year profit was more than 7 billion VND; Kim Vi Stainless Steel Import-Export Production Joint Stock Company (code: KVC) also reported an after-tax loss of 6.3 billion VND in the third quarter of 2023 - an increase compared to 5.9 billion VND in the same period last year. Accumulated for 9 months, Kim Vi Stainless Steel had a negative net profit of 3.6 billion VND.
The "bright spot" of the steel market is that the two "giants" Hoa Phat and Hoa Sen have after-tax profits of 2,000 billion VND, up 212% (up 38% compared to the previous quarter) and 438 billion VND respectively.
Steel industry expert Nguyen Van Sua said that in order to stabilize steel prices as well as restore the market in this industry, in addition to stimulating investment, it is necessary to promote real estate projects, construction projects, and construction projects. government's Invest. When the real estate market becomes vibrant again, steel prices will increase and the market will warm up. Because the real estate and civil construction industries greatly affect the demand for the steel industry, accounting for about 50-60% of the entire industry's demand and affecting most finished steel products.
Positive signs appear
More positive signals for the real estate industry have gradually appeared recently. VSA data shows that from September 2023, steel consumption recorded the highest level since the beginning of the year, reaching nearly 2.2 million tons, up 4.7% compared to August and up 9.4%. compared with the same period last year. Of which, construction steel consumption reached nearly 1 million tons, up 9% and 4% respectively.
Hoa Phat Company also said that in September 2023, the business sold 596,000 tons of steel of all kinds (excluding steel pipe and galvanized steel products), an increase of 7% compared to August. Of which, construction steel was made. contributed 352,000 tons, the highest since the beginning of the year and an increase of 15%.
Similarly, at Vietnam Steel Corporation - Joint Stock Company (VNSteel), sales output in September 2023 reached more than 268,000 tons, an increase of 8% compared to August and an increase of 9% over the same period.
With the recovery of the market, experts predict that business profits will improve in the last quarter of the year thanks to increased steel exports and reduced inventories at businesses...
In a recent report, KB Vietnam Securities Company stated that steel prices will tend to increase slightly in the fourth quarter of 2023, after the period of cheap inventory imported from China being consumed. Therefore, gross profit margins of businesses will be less affected by the recent increase in ore prices. In addition, China's policy of limiting crude steel production in the fourth quarter of 2023 (to reduce environmental damage) will boost selling prices in the last months of the year.
In addition, public investment disbursement by the end of September reached 51.38% of the 2023 plan. Steel prices account for about 30% of the cost structure of infrastructure construction materials. Therefore, the increase in public investment in the last months of the year will boost consumption demand for the steel industry. As for Hoa Phat, one of the reasons why this business's steel consumption in September was higher than in August was mainly due to transportation projects such as the North-South Expressway, newly implemented airport projects and speeding.
However, experts say that the time for the steel market to recover may not be until the first quarter of 2024.
Economic expert Ngo Tri Long said that steel mainly serves construction needs, while steel serves other industries and activities insignificantly. Therefore, the most important thing is that solving the difficulties and gloom of real estate will remove the difficulties of the steel industry. Therefore, this expert believes that the real estate market will only be able to recover from 2024 when the revised Land Law is passed, removing a series of legal bottlenecks and financial pressures, and interest rates are adjusted. decreased when banks created more favorable conditions to access capital as well as stimulate demand for home buyers.
However, VNDirect securities company believes that the real estate market will recover from 2024, which is too early and too optimistic. Based on the up and down cycle of the real estate market over the past decade, it may take another 2-3 years for the real estate market to recover. From there, steel consumption can flourish again.
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