Steel industry upbeat in Q1 on higher Chinese prices

The consolidated revenues of Hoa Phat Group, the company with a third of the construction steel market share, increased by only 3% but it managed to reverse its two-quarter losing streak with profits of VND380 billion (US$16.2 million). Steel accounted for 94% of the profit.

Vietnam Steel Corporation turned around to make a profit of VND70 billion after three quarters of losses, while Hoa Sen Group reported a profit of VND250 billion after two quarters of losses. The latter’s management had forecast profits of VND50 billion.

Profits improved mostly due to companies’ internal management initiatives.

Hoa Phat said demand did not recover in Q1, and its positive results were due to effective inventory and materials management, and flexible sales strategies.

Hoa Sen said it managed its costs well, reducing them by 40% year-on-year.

According to the Vietnam Steel Association, finished steel sales fell by 25% year-on-year to six million tons while production dropped by 21% to 6.6 million tons.

But prices rose in the first quarter, tracking Chinese prices, which rose for three straight months since the start of this year.

From around VND15 million per ton for CB240 coil and CB300 D10 rebar, big brands gradually raised their prices to VND16 million.

Now most big companies are upbeat about the future.

Tran Dinh Long, president of Hoa Phat, said the steel industry’s most challenging period had passed though recovery would depend on demand, which is still low.

Le Phuoc Vu, president of Hoa Sen, expressed a similar sentiment.

In April many companies reversed their price hikes and cut them two or three times, driving them back to VND15 million a ton, and expect this to stimulate demand.

However, a major obstacle to recovery is the continued bleak outlook for the real estate market.