Steel industry is in the most difficult period in 10 years

EVS Research believes that the steel industry in the fourth quarter may recover slightly, but in the long term, it is still difficult.

5/8 steel enterprises have negative net profit
In a recent report, Everest Securities JSC (EVS Research) stated that the steel industry is in the most difficult period in 10 years.

Data from the Vietnam Steel Association (VSA) showed that domestic steel production and consumption was at a low level in the third quarter. Specifically, steel production in the third quarter reached 6.7 million tons, down 18% compared to the previous quarter and down 7% compared to the same period in 2021. Steel consumption reached 6.1 million tons, down 12% compared to the previous quarter and flat compared to the third quarter of 2021.

Accumulated in the first 9 months, finished steel production reached 20.8 million tons, down 6% over the same period in 2021; finished steel consumption reached 19.2 million tons, down 2% over the same period in 2021.

Steel production and consumption in the third quarter was even lower than in the third quarter of 2021, when our country was closed because of the epidemic, construction activities were almost frozen in big cities.

“In the third quarter and in the first 9 months of the year, the steel industry faced difficulties because the real estate industry was affected after the incident of Tan Hoang Minh earlier this year, bonds were tightened. This is an important source of capital for real estate businesses in the past few years,” the report said.

Up to the time of publishing this report, most steel enterprises have announced their financial statements for the third quarter. Revenue of the 8 largest steel enterprises in turn reached 59,274 billion dong, down 19%; profit after tax was negative 3,317 billion dong.

In which, the 5 largest capitalization enterprises, Hoa Phat (HPG), Hoa Sen (HSG), Nam Kim (NKG), Thai Nguyen Iron and Steel (TIS) and SMC Steel (SMC) all recorded profit after tax. minus. Especially, Hoa Phat had the second quarter of recording negative profit after tax after nearly 12 years of positive growth.

The fourth quarter may recover slightly
After the dismal third quarter, EVS Research forecasts that the steel industry will recover slightly in the fourth quarter, when the construction season begins. However, steel prices are likely to remain low because the prices of production materials such as coke and iron ore have cooled down since March.

However, there are still some factors that hold the steel industry back in the long term. Specifically, real estate is facing difficulties because bond capital flows are being squeezed this year. On the other hand, the Land Law has been revised with many changes, waiting for the official amendments to be enacted may slow down the approval rate of projects in the near future.

“In the short term, the steel industry may recover slightly in the fourth quarter. However, in the long term, the domestic steel industry is still facing difficulties,” said the analyst.

Vietnambiz