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Forecasting the steel and galvanized steel industry in the last 6 months of the year, Mirae Asset Securities Joint Stock Company believes that the steel industry will be directly affected in terms of output because the real estate industry is difficult to recover as expected due to control policies. real estate credit.
Specifically, new commercial housing projects in Hanoi and Ho Chi Minh City decreased by over 30% and 60% respectively and are expected to recover only from 2023.
According to a survey by Mirae Asset, the cost of building a crude house in the form of a turn-over has increased from VND 3 - 3.5 million in the third quarter of 2020 to VND 6.5-7.5 million in June 2022 in Dong Nai and Binh Duong areas.
Other types of construction materials also had strong price increases, of which cement and sand prices in June 2022 increased by an average of 20% and 35% over the same period.
The high construction unit price will continue to affect the demand for the steel industry in the short term in the context that people's income in the period of 2020-2021 has been affected by the epidemic and the psychology of waiting for the price to decrease will take place in the future. the last 6 months of 2022.
According to this unit, the demand for the steel industry is directly related to the real estate industry, with the capital flow for the real estate market being controlled, the real estate industry in the next 12 months will be difficult.
In addition, domestic steel inventories by the end of May reached a record level of nearly 1.5 million tons, equivalent to the output in May 2022, compared with the average of 3 years 2019-2021 at only 56% of production. month amount.
Mirae Asset believes that the high inventory has forced steel companies to lower their selling prices to stimulate demand, causing steel prices in early June 2022 to drop to VND 16.8 million/ton, down 2.1 million dong/ton compared to the peak.
On the other hand, the steel and galvanized steel industry will face many risks such as raw material price fluctuations. It is estimated that raw material costs account for 65-75% of production costs. Especially in the galvanized steel industry, the price of HRC accounts for more than 80% of input material costs, making the profit of the whole industry fluctuate greatly according to HRC.
The second risk is that inflation will reduce construction demand. From the third quarter of 2021, the rising coal price has directly put upward pressure on the entire construction materials and fuel industry.
Mirae Asset assesses that in the case of unadjusted construction materials, in the last 6 months of 2022, the construction floor area may decrease by 3-5% over the same period.
The risk of Chinese manufacturers increasing exports is also a concern for the steel and galvanized steel industry. Because in the first 4 months of 2022, Chinese manufacturers, due to the impact of CO2 restrictions and social distancing, only exported 18.2 million tons, down nearly 30% over the same period.
In the event that the last 6 months of 2022 manufacturers in China resume normal operations, the steel market may face more difficulties as products from China are often more competitively priced thanks to the advantage of scale production.
In addition, there is also a policy risk when Decree 101/2021/ND-CP approves the policy of increasing export tax on billet products if steel prices rise too high to contribute to stabilizing supply. steel billet, restrict the export of steel billet to keep for domestic production, ensure the sustainable development of the steel industry in the long term.
"In the last 6 months of 2022, under the pressure of inflation and real estate credit control, we lower our output forecast by 15% compared to previously reported.
For the whole year of 2022, we forecast that steel output of the whole industry in 2022 will reach 27.76 million tons, down 10% over the same period, export volume alone will reach 7.6 million tons, up 1% over the same period, while domestic steel consumption was only 20.1 million tons, down 13.6% over the same period," forecasted Mirae Asset.
Vietnambiz
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