Steel sector stocks plummet

A number of steel companies reported losses in the third quarter of 2024, dragging down many steel industry stocks. However, according to expert forecasts, the difficult period for the steel industry will soon pass.

A number of steel companies reported losses in the third quarter of 2024, dragging down many steel industry stocks. However, according to expert forecasts, the difficult period for the steel industry will soon pass.

Steel sector stocks fall sharply.

Immediately after the release of the Q3/2024 reports from steel companies, showing slowing growth or even losses, a series of steel stocks reversed course and fell sharply. Statistics from July 8th to the end of November 2024 show that the top 5 listed steel stocks decreased by an average of 39.5%, while during the same period, the VN30 index only decreased by 1.3% and the VN-Index only decreased by 3.2%.

The sharp decline in steel stocks affected both trading companies, such as SMC Investment and Trading Joint Stock Company (SMC), which fell 66.4%; Tien Len Steel Group Joint Stock Company (TLH), which fell 48.4%… and manufacturing companies, such as Hoa Sen Group (HSG), which fell 25%; Nam Kim Steel Joint Stock Company (NKG), which fell 23%; and Vietnam Steel Corporation - JSC (TVN), which fell 34.5%…

For example, in the case of Hoa Sen Group, in the fourth quarter of the 2023-2024 fiscal year (from July 1, 2024 to September 30, 2024), revenue reached VND 10,108.7 billion, an increase of 24.7% compared to the same period; after-tax profit recorded a loss of VND 185.89 billion compared to the same period; gross profit margin decreased sharply from 13.2% to only 8.4%.

For the fiscal year 2023-2024 (from October 1, 2023 to September 30, 2024), Hoa Sen Group achieved revenue of VND 39,271.89 billion, an increase of 24.1% compared to the same period; after-tax profit recorded a profit of VND 510.12 billion, an increase of 15.97 times compared to the same period.

Also a large-scale steel producer, Pomina Steel Joint Stock Company (code POM) incurred an additional loss of VND 285.82 billion in the third quarter of 2024, bringing the total loss for the first nine months of 2024 to VND 790.7 billion, compared to a loss of VND 646.98 billion in the same period last year, an increase of VND 143.73 billion.

Although not incurring losses like Hoa Sen Group and Pomina Steel, Nam Kim Steel Company's business results also showed slower growth. Specifically, in the third quarter of 2024, Nam Kim Steel recorded a profit increase of 174.1%, reaching VND 64.85 billion; cumulative profit for the first nine months of 2024 increased by 296%, reaching VND 434.59 billion.

Among trading companies, SMC Trading and Investment Company recorded a loss of VND 82.42 billion in the third quarter of 2024. Prior to that, in the first six months of 2024, the company avoided losses by selling investments and liquidating assets. However, in the third quarter, with no more profits from other operations, SMC Trading and Investment Company returned to a loss.

Similarly, Tien Len Steel Company incurred a loss of VND 120.22 billion in the third quarter; its cumulative loss for the first nine months of 2024 reached VND 269.24 billion.

Steel prices are expected to rise again soon.

The steel trading group reported losses in the first nine months of 2024 due to continued declines in steel prices and difficult sales, forcing them to sell below cost. As a result, this group maintained only a certain level of inventory.

Conversely, manufacturing businesses, despite slowing growth, are still showing signs of increasing inventory. In the first nine months of 2024, Hoa Sen Group increased its inventory by VND 2,073.6 billion, reaching VND 9,702.2 billion, accounting for 49.6% of total assets; Nam Kim Steel increased its inventory by VND 858.1 billion, reaching VND 6,576.8 billion, accounting for 47.7% of total assets; and Vietnam Steel increased its inventory by VND 467.3 billion, reaching VND 4,514.2 billion, accounting for 18.6% of total assets…

With their inventory hoarding strategy, steel manufacturers risk a rebound if steel prices don't recover soon. However, experts predict that the difficult period for the steel industry will soon end, and steel prices will rise again.

Vietnam Foreign Trade Commercial Bank Securities Company (VCBS) expects steel prices to maintain their recovery trend due to improved construction demand in the US, Europe, and China thanks to loose monetary policies globally; increased global production demand leading to higher input material prices such as iron ore and coking coal, resulting in higher selling prices; and a sharp decline in China's steel production, while inventories remain low at the end of 2024.

Similarly, BIDV Securities Joint Stock Company (BSC) forecasts that steel prices have entered the end of their downtrend cycle, forming a bottom in the short and medium term (the next 3-6 months). In June 2024, China introduced new quality standards for steel bars; at the same time, several countries initiated anti-dumping investigations against Chinese steel. This created a wave of inventory liquidation, putting downward pressure on prices. This adjustment mainly stems from inventory pressure in society, not in factories, and is therefore a short-term correction.

Source: https://baodautu.vn/loat-co-phieu-nganh-thep-lao-doc-d231584.html