Steel consumption in the third quarter will slow down, inventories will be high

According to the Vietnam Steel Association (VSA) in the first 7 months of the year, finished steel production reached 18.8 million tons, down 4% over the same period in 2021. Finished steel sales reached 17.1 million tons, down 1 .2% over the same period in 2021. In which, exports reached 4.1 million tons, down 1.5% over the same period last year.

Sales of HRC hot rolled steel reached 3.9 million tons; CRC cold rolled steel reached 1.4 million tons; coated and color coated corrugated iron reached 2.6 million tons, down 6.2%, respectively; 4.6% and 10% over the same period in 2021.

Sales of construction steel alone still increased by 5.4%, reaching 7.5 million tons. Steel pipe sales reached 1.5 million tons, up 2% over the same period in 2021.

 (Source: VSA)

BSC Securities said that sales volume decreased in both domestic and export markets due to the slowdown in the domestic real estate market after the management agency's move to strictly control capital flows into this sector.

In addition, steel demand in export markets decreased due to China's Zero COVID policy and the Russia-Ukraine conflict.

 (Source: BSC)

It is forecasted that steel consumption in the third quarter will remain at a low level because of the low construction season (rainy season) and inventories of large steel mills and moderate production activities. When inventories are still large in the context of steel prices continuously falling, the cost of goods will stay high in the third quarter.

BSC expects steel consumption to be better in the fourth quarter as construction activity usually accelerates in the last quarter of the year and construction costs decrease due to a sharp drop in steel prices.

  (Nguồn: BSC) 

In addition, the sharp decrease in input materials is a great support for steel enterprises in the second half of 2022. Price of iron ore, coking coal and scrap steel dropped sharply, down 28%, 53% and 45, respectively. % since the top. The price of HRC (the input material of the galvanized steel industry) has also dropped 35% since the peak.

Since the inventory turnover of the steel industry is usually 2-3 months, BSC believes that production costs will decrease relatively, helping the profit margin of enterprises in the industry to improve in the fourth quarter.

Vietnambiz