From the second half of 2020 to the beginning of 2021, steel businesses flourished when steel prices continued to increase, from flat steel for the manufacturing sector to construction rebar.
Public investment spending on post-pandemic infrastructure is expected to be a major driver of steel demand around the world, from rich countries to developing regions. However, in the period of late 2020 to early 2021, the restart of the manufacturing sector created a great source of demand, leading to an increase in flat steel prices.
Steel prices soar
Prices on the Chinese flat steel market show solidity from the end of 2020 to the beginning of 2021 before weakening in the near-Chinese New Year period, mainly due to the influence of the cold winter (which impact on construction activities) followed by the Tet holiday. After the market returned from February 18, steel prices started to regain momentum.
Domestic steel demand in China is still high thanks to stable consumption from the manufacturing sector, and the expectation of construction activities to restart. This is a positive factor affecting the sentiment of the steel market.
Hot-rolled coil (HRC) from China recently increased in part due to rumors that the government of the billion-dollar government may cut export support spending, leading to a move to raise selling prices to secure Guaranteed profits from manufacturers. Research firm SteelMint said many market participants expect that the level of export support spending will decrease to 8-9% from the current 13%, thereby, causing export prices to rise higher and opening the door. door for suppliers from other countries to compete with Chinese steel.
Expensive freight charges are also a driver of steel prices.
Not only in the Asian market, HRC prices worldwide have been increasingly strengthened, research firm Fastmarkets said.
In the US, domestic HRC prices averaged $ 1,316 per ton in February 2021. Flat steel prices in the world’s largest economy are fueled by shortages of domestic supplies, long delivery times, and limited imports. Currently, the US is still imposing a 25% import tax (under Section 232 of the Trade Act) on steel.
In Vietnam, according to Kallanish, the hot-rolled coil market is looking up as foreign suppliers raise their offers. Buyers in the S-shaped country are looking to India for more competitive alternative sourcing.
There was an order of 30,000 tons of HRC at the price of 745 USD / ton. CFR was ordered by Vietnamese buyers from India, expected to deliver in early April. In February 2021, Vietnam was in the group of 3 countries importing steel. India the most. Specifically, Vietnam imported 50,049 tons from South Asian countries, behind UAE with 66,898 tons, Italy with 68,480 tons.
On 11/03, the Southeast Asian Steel Association SEAISI quoted information from Kallanish, said steel producer Formosa Ha Tinh has also raised the domestic selling price of HRC in the midst of the exciting market. Accordingly, the new price increased 45-50 USD / ton compared to the old price announced more than 2 months ago.
Hoa Phat (HOSE: HPG) also focuses on manufacturing steel HRC to meet market demand. Hoa Phat’s sales volume for HRC after the first 2 months of 2021 has reached 428,000 tons, equivalent to 74% of the total output in 2020.
Favorable conditions for the steel industry to develop
Large steel enterprises in Vietnam are shifting to export to the US and Europe, markets with strict quality requirements but with higher selling prices than traditional markets in Southeast Asia.
The country’s largest corrugated iron company – Hoa Sen Group (HOSE: HSG) has set a new galvanized sheet export record with an output of 121 thousand tons in the first 2 months of 2021, export revenue surpassed USD 100 million. Hoa Sen is currently the largest exporter and accounts for half of the whole industry’s galvanized steel exports, with 37.5% of the domestic market share.
For Nam Kim Steel (HOSE: NKG), export volume to Europe and North America continues to remain high with enough orders to operate factories at maximum capacity until June 2021, an analyst at Rong Viet Securities (VDSC) said in a short report. Exports to Europe and North America currently account for about 80-90% of Nam Kim’s total export volume. In the short term, the Company gives priority to export and maintains the proportion of domestic consumption at 30-40%. VDSC forecasts that NKG’s sales volume can reach 400,000 tons in the first quarter, up 35% year-on-year.
Favorable movements of steel prices are expected to be the driving force for businesses to achieve strong profit growth in the first quarter of the year, partly due to the low comparative basis of Q1 / 2020 – the outbreak of Covid-19 outbreak. play.
In the domestic market, steel prices of various types rebound after the Tet holiday. Steel trading enterprise Tien Len (HOSE: TLH), with the main domestic market, has just reported a large profit (67 billion) in the first 2 months of 2021. Steel price increase started from the end of last year. revived the gloomy business performance that lasted for nearly 2 years (Q4 / 2018 to Q3 / 2020).
On the stock market, steel stocks rose simultaneously. Recently, analysts from securities companies have mostly positively commented on the business prospects of the steel industry.
The 2021 Annual General Meeting of Shareholders is approaching. Some steel companies have released the first information about the most important meeting of the year, and also business plans that the Board of Directors is expected to submit to shareholders. NKG’s management sets a target of 600 billion dong in profit in 2021. Meanwhile, SMC announced a conservative profit plan at 160 billion dong, lower than the result achieved in 2020.
The steel industry is enjoying the favorable wind, and businesses have also started to launch new expansion plans. The upcoming congress season is a time for executives to share how they will lead businesses to seize opportunities when the market flourishes, to both aim for growth goals and at the same time avoid financial difficulties like what happened during the industry downturn cycle from 2018 to 2019.
Source: Fili
