Steel enterprises under pressure to reduce demand

This makes analysts say that the business performance of construction steel companies is still low.

According to the Vietnam Steel Association (VSA), steel prices have continuously increased over the past time mainly due to the lack of input prices of input materials for steel production such as coal, iron ore, scrap steel, hot-rolled coils, etc. signs of stopping the uptrend. VSA said that the high price of raw materials caused domestic factories to increase selling prices many times to compensate for production costs and reduce losses.

Construction steel products at Hoa Phat Hai Duong Steel Joint Stock Company are supplied to the market. Photo: Danh Lam – VNA

Since the beginning of the year, steel prices have been continuously adjusted up, with a total increase of more than 1 million VND/ton. Although the upward momentum has slowed down, but many information that steel prices will continue to increase in the coming months.

As for Hoa Phat Group, the analysis team of Vndirect Securities assessed: "With weak demand, we are concerned about Hoa Phat Group's ability to transfer the risk of increasing input material prices to consumers. In addition, low factory operating efficiency in the first half of 2023 will also affect the company's profit margin, so we forecast Hoa Phat Group's net profit may be will still be negative in the first quarter of 2023".

New data released by the group shows that consumption of steel products in domestic and foreign markets both decreased over the same period. This reflects two different states of the construction market in early 2022 and 2023. In the first quarter of 2022, construction steel consumption reached a record high thanks to strong growth in market demand. In 2023, the market was quiet due to weak demand, leading to negative steel consumption.

Accumulated in the first 2 months of the year, Hoa Phat Group's crude steel output reached 809,000 tons, down 42% over the same period. Sales of construction steel, HRC and billet recorded 877,000 tons, down 34% compared to the first 2 months of 2022.

At the recently held 2023 General Meeting of Shareholders of Hoa Sen Steel Sheet Group, a representative of this enterprise said that steel exports still have many potential uncertainties and uncertainties in the context of increasing competition and challenges. trade barriers.

Forecasting the market situation in 2023, according to this business representative, the fierce competition in the domestic market, tightening monetary policies, increasing interest rates, and escalating exchange rates may negatively affect the economy. to the needs and production and business activities of units in the industry.

On the basis of this forecast, Ton Hoa Sen also offers 2 consumption plans for the financial year 2022 - 2023. Under Option 1, the consumption volume will reach 1.52 million tons, revenue of 34 trillion dong and profit after tax is 100 billion dong. In the more positive plan, this enterprise can achieve sales output of 1.62 million tons, revenue of 36 trillion dong and profit after tax of 300 billion dong.

Previously, according to the report ending the financial year 2021 - 2022, the consumption volume of Hoa Sem Group reached more than 1.81 million tons, completing 91% of the plan; revenue reached 49,711 billion dong, completing 107% of the plan; consolidated profit after tax reached VND 251 billion, completing 17% of the plan.

According to the analysis team of Vndirect, the prolonged dismal demand of the domestic civil construction sector will have a significant impact on the demand for construction materials in 2023. This means that the demand is expected in short term for steel products remains low.

However, the market still recorded many factors supporting the growth of steel enterprises until the end of the year when the demand for iron and steel is expected to improve thanks to more public investment projects being implemented. Recently, the Ministry of Transport was assigned by the Government to disburse public investment with a capital of 94,000 billion VND, 1.7 times higher than in 2022.

Besides, the positive signal from the export market, especially the recovery in demand in China - the largest steel producer and consumer, accounting for more than 50% of the total supply and demand in the world - will support support domestic steel enterprises.

The research team of DSC Securities said that, in the context of China abolishing COVID-Zero, aiming to boost the economy and implementing a package of 16 policy points to "rescue" the real estate industry, iron ore prices have declined. had a strong increase of nearly 50% from 85 USD/ton to nearly 120 USD/ton. DSC expects demand as well as steel prices to increase higher in the second half of 2023.

However, the DSC team noted that these recovery signals are still quite weak and potentially unsustainable. China has abolished COVID-Zero, but it will still take a certain amount of time to really restart the economy.

According to this study, FDI growth and public investment are also not certain factors. When the supporting factors have not been put into practice, steel prices may end up gaining momentum due to high expectations and enter a correction span.

However, last week, steel stocks still recorded a gain in the context that the steel industry is expected to recover thanks to the Government's promotion of public investment and the recovery of demand in China. Accordingly, NKG increased by 8.8%, HSG increased by 7.2%, HPG increased by 4.7%.

Closing the last trading session of the week 10/3, NKG shares of Nam Kim Steel were at 16,500 dong, HSG of Hoa Sen Steel Group was at 16,400 dong, Hoa Phat Group's HPG was at 21,300 dong/unit. .

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