Steel consumption up, prices down

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Steel consumption up, prices down

Vietnam News - 7/21/2015 2:30:31 PM

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Prices of steel products went down in the first six months of this year though steel consumption jumped on high demand, according to the Vietnam Steel Association (VSA).

Figures of VSA showed the country’s steel output in the first half of this year increased 18.6% year-on-year to 6.45 million tons and sales soared 22.2% to 5.46 million tons, thanks to the recovery of the local real estate market.

However, steel prices fell strongly in the period. Some steel producers, especially those with small production scale and high costs, incurred losses although prices of steel material were down as the price of construction steel dropped by 8% to VND10.9 million a ton.

At a meeting with investors last week, steel producer Hoa Phat Group said it turned out 658,000 tons of construction steel in January-June and sold 675,000 tons in the period, up 52% year-on-year.

Hoa Phat said it was able to sell more steel than the volume it produced in the period owning to its inventories carried over from last year.

Hoa Phat now holds 22% of Vietnam’s domestic steel market. The group posted consolidated revenue of over VND7.7 trillion (US$355.4 million) and consolidated profit of around VND1.2 trillion in the first half of this year with steel sales accounting for 78% of total revenue and 70% of total profit.

Hoa Phat Group’s net profit margin was 16% in the period.

Although sales rose, steel enterprises said they had to cope with a slew of challenges from January to June due to falling prices and declining exports. Outbound steel sales totaled 846,000 tons out of 5.46 million tons sold in the period, down 4.7%.

Tran Dinh Long, chairman of Hoa Phat Group, told investors that steel prices are predicted to drop further towards the year-end.

Long explained China, the world’s biggest steel consumer, has seen a slowdown in growth but its steel supply outpaced demand. Therefore, China may boost steel exports to Vietnam and other markets at low prices in the coming time.

Competition between local steel makers and between local products and imports will be tougher when more bilateral and multilateral free trade agreements (FTAs) between Vietnam and its partners take effect.

Long said steel import tariffs will be cut to 0% when the FTAs including the Eurasian Economic Union (EEU) and the Trans-Pacific Partnership (TPP) come into force.

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