Looking back to 2024, has the steel industry found a breakthrough opportunity?

After a long period of decline, Vietnam's steel industry has seen many signs of recovery this year.

These encouraging signs indicate that Vietnam's steel industry has overcome its most difficult period. However, with many challenges still present, the industry needs more time to break through into a new growth phase.

The domestic steel market is showing signs of recovery.

During the period of 2022-2023, Vietnam's steel industry witnessed a sharp decline due to a series of challenges such as rising input material prices and decreased demand. However, from the end of 2023 to the beginning of 2024, the steel industry received initial signs of recovery, including improved domestic demand and a more optimistic outlook for the global steel industry.

According to statistics from the Vietnam Steel Association (VSA), in the first quarter of this year alone, Vietnam's finished steel production reached 7.06 million tons, a 5.5% increase compared to the same period last year. Consumption reached 6.68 million tons, a 10% increase compared to the same period. Exports also recorded good growth, reaching 2.25 million tons, a 36% increase compared to the same period. Domestic steel prices have also recovered from a 3-year low and have continuously increased during this period. From November last year to March this year, steel prices in the North underwent a total of 6 consecutive price adjustments. The price of CB240 coiled steel increased to VND 14.34 million/ton, an increase of approximately VND 910,000 after 6 adjustments. The price of D10 CB300 ribbed steel bars also increased to VND 14.53 million/ton, an increase of approximately VND 790,000 compared to the end of November.

In the second and third quarters, the steel industry slowed down again, but overall maintained a more stable growth rate compared to the same period last year. Notably, at the end of the third quarter and the beginning of the fourth quarter, the steel industry received significant support from the "heat" of the Chinese steel industry. At this time, steel prices there recovered from multi-year lows and even climbed to a 3-month peak. The price of raw materials for steel production, iron ore, also continuously increased. Accordingly, steel prices in the domestic market also began to rise again since the end of September. After several consecutive upward adjustments, steel prices in Vietnam are currently stable around 14 million VND/ton.

Trends in domestic construction steel prices from the beginning of 2023 to the present.

Thus, viewed from a positive perspective, Vietnam's steel industry has now passed its most difficult phase and is gradually restoring stability. Many businesses are witnessing improvements in consumption demand, revenue, and profit margins; low-priced inventory is gradually being released, and steel prices are slowly recovering. However, it is still too early to say that Vietnam's steel industry has fully recovered and is about to witness significant growth, as the industry still faces many intertwined difficulties and challenges.

The steel industry still faces many challenges.

Assessing the future prospects of the steel industry, Mr. Duong Duc Quang, Deputy General Director of the Vietnam Commodity Exchange (MXV), commented that this year, the Vietnamese steel industry has shown many signs of recovery and is gradually stabilizing after a long period of decline.

Mr. Duong Duc Quang, Deputy General Director of the Vietnam Commodity Exchange (MXV)

However, these are only initial signs of improvement; this recovery remains uncertain and unsustainable due to the lack of a real breakthrough in consumer demand. The recovery data is primarily based on comparisons to last year's low base. Furthermore, the global steel industry continues to face difficulties due to the negative impact of the Chinese steel crisis. Therefore, in the short term, Vietnam's steel industry is unlikely to break into a new growth phase and is expected to remain sluggish, at least in the first half of next year.

Indeed, despite its recovery efforts, Vietnam's steel industry still faces numerous challenges from both domestic and international markets.

Firstly, the recovery of the domestic steel industry this year partly stems from the low base of 2023, rather than a significant improvement in consumption demand. In 2023, Vietnam's steel industry witnessed a sharp decline due to the frozen real estate market, reduced construction projects, and the weakening Chinese industry. The sharp drop in demand led businesses to continuously lower steel prices, most notably a series of 19 consecutive price reductions lasting until November, bringing domestic steel prices to a three-year low. Meanwhile, considering the context of the steel industry this year, compared to the first quarter, when steel demand and production recorded good growth, the second and third quarters were significantly quieter.

Secondly, Vietnam's steel industry is heavily dominated by China's steel industry. Currently, China is struggling with a steel oversupply crisis, and its massive industry is in decline, with steel prices continuously plummeting to multi-year lows. Therefore, Vietnam can hardly avoid negative impacts, like a "domino effect." Furthermore, China's continuous push to export cheap steel could lead to domestic businesses facing the risk of losing market share.

China's steel exports

Thirdly, export activities face numerous difficulties due to businesses encountering trade defense lawsuits, anti-dumping and anti-subsidy technical barriers, and safeguard measures erected by importing markets. According to statistics, as of the end of October 2024, out of a total of 267 foreign trade defense investigations against Vietnam, approximately 30% involved steel products. Notably, most of these lawsuits occurred in Vietnam's key steel export markets such as the United States, the European Union (EU), Australia, and India.

Given these challenges, Vietnam's steel industry is unlikely to achieve a strong breakthrough in the short term and is expected to remain sluggish, at least in the first half of next year. However, in terms of opportunities, this can be seen as a time for the Vietnamese steel industry to strive for improvement and seek a more sustainable path forward.

Source: https://congthuong.vn/nhin-lai-nam-2024-lieu-nganh-thep-da-tim-duoc-co-hoi-but-pha-365072-365072.html