Assessing the prospects of the steel industry in the second half of 2019, analysts said that the increased competitiveness in the coming years will be a test with steel enterprises about market share, the ability to maintain profits and cash flow.
Increasing competition, large customers will only choose the products of businesses with quality products, competitive prices. Therefore, steel industry stocks are forecasted to have room for growth, but the opportunity is not evenly divided among all stocks which will have strong differentiation.
In fact, steel stocks have had "sideways" movements along with the general market trend. From the opening session of the New Year's session (January 2, 2019) to the close of June 18, 2019, HPG shares fell by 0.069%, NKG also almost went sideway when falling from VND 6,140 / share. down to VND 6,100 / share. HSG, TVN also struggled and moved sideways in the period from the beginning of the year until now.
Mr. Le Duc Khanh, Chief Economist and Strategic Director of PetroVietnam Securities Joint Stock Company said that the US Federal Reserve (FED) is likely to reduce interest rates in July next, while commodity prices still remain. remain high; including steel products that support this business group. But it should be noted, in 2019, Vietnam is under great pressure on inflation, exchange rates as well as rising interest rates will make steel enterprises face difficulties.
Mr. Le Duc Khanh said that the factors that have a strong impact on the steel industry are geopolitical and macroeconomic fluctuations in the world; In particular, the escalating US-China trade war, or the supply of steel is being affected by the dam of the tailings dam at the iron ore mine in Brumadinho, Minas Gerais state, Brazil.
The operation of Hung Nghiep Iron and Steel Hung Nghiep Formosa Ha Tinh (FHS) in operation helped stabilize Vietnam's steel market, but it will also increase competition among many domestic steel enterprises. Besides, the sharp increase in steel prices in the past period is also a supportive factor for businesses but not all businesses take advantage of opportunities, because the market position of enterprises is different.
Mr. Le Duc Khanh acknowledged that in the remaining period of 2019, the real estate market still has room to develop, so steel stocks still have certain development opportunities. However, the development depends on the position of the business, large customers will only choose the products of businesses with quality products, many incentives, competitive prices.
According to Nguyen Duy Dinh, senior customer care specialist of MB - MBS Securities, the steel industry is facing input costs such as electricity, oil, and ore prices that will increase profit margin. The difference between the selling price of a product and the cost of production plus consumption costs) of the low-risk industry, plus the consumer market may be difficult because the real estate industry is showing signs of slowing down. .
However, there are still bright spots that are the leading steel enterprises with large production scale can find contracts from large construction works, or find new export markets.
Mr. Nguyen Duy Dinh said that the prospect of the steel industry in the short-term is assessed to be neutral, neither too positive nor negative.
According to MB - MBS Securities Joint Stock Company, demand for steel in Vietnam is expected to increase by about 10% for long and flat steel in the coming years. For long steel, most is consumed domestically, while about 1/3 - 1/2 of total flat steel is exported.
For long steel, MBS forecasts consumption at approximately 12 million tons in 2019, consumption on total industry capacity at about 68%. Competition in this segment will increase moderately. For galvanized sheet products, consumption will be at 4.5-5 million tons, while the total industry capacity will reach 7.5 to 8 million tons in 2019.
In terms of usage, the main source of steel consumption in Vietnam is commercial and civil constructions, which are likely to slow down in the next few years.
The increase in capacity of the five largest manufacturing plants was about 2.2 million tons, or about half of total consumption and exports in 2017. Therefore, there will be fierce competition in the field of production. this product.
Besides the factors of the industry, the internal business also has its own difficulties. Some businesses have very high debt-to-equity ratio, putting them under pressure of cash flow.
Assessing the advantages for the development of the industry, the analysis team from MB - MBS Securities Joint Stock Company said that industrial works could increase thanks to the increase in FDI and public spending on infrastructure. floor. Infrastructure spending in Vietnam has been growing at double digits since 2012. Many infrastructure projects are in the beginning stages, such as the Ho Chi Minh City Metro Line, Long Thanh Airport, North-South highway, many highways and bridges around Hanoi and Ho Chi Minh City. Ho Chi Minh...
An analysis from MBS said: “Self-defense tariffs on imported steel will expire in 2020 - 2021. However, with the increasing protectionism trend in the world and the importance of the steel industry to Vietnam. , we believe safeguard duties will continue to apply. However, increasing global protectionism is also a pressure on many exporters. Price competition will take place in the coming years, especially for flat and galvanized steel segments. ”
Despite fierce competition in the industry, with increasing supply capacity and world steel pressure, MBS still considers Vietnam's steel industry to be positive in the long run due to favorable macroeconomic environment, Government ambitious infrastructure projects and potential FDI inflows to Vietnam.
“Vietnam's steel industry is more stable than the world due to its high growth rate and concentration. Large enterprises still account for the majority of market share, so domestic steel prices are quite stable, ”said MBS.
According to the Vietnam Steel Association, growth of the steel industry is still positive. Industrial production in the first 5 months of 2019 achieved a good increase thanks to positive production results in May of some industries; including processing and manufacturing industries.
Generally for the first 5 months of 2019, steel products reached more than 10.5 million tons, up 9.2% over the same period in 2018; sales of steel products reached over 9.7 million tons, up more than 11% over the same period in 2018; in particular, steel exports reached over 2 million tons, up 6% over the same period in 2018.