[Ferro-Alloys.com] The implementation of many large projects after the social distancing period and disbursement of public investment for infrastructure until the end of this year are expected to support growth in construction steel consumption, according to Rong Viet Securities (VDSC).

This trend is expected to persist in the medium term, whereby domestic steel mills will directly benefit, VDSC said.

The Hoa Phat Group (HPG), a listed construction steel company, hopes that its new production lines at the Dung Quat complex can catch up with the recovery of steel bar demand, thereby capturing market share and generate profit growth for the second half of 2020 and 2021.

Meanwhile, the market has shown signs of recovery for steel pipe and galvanised steel products from the beginning of May and this trend has persisted for many months, it said.

In the steel pipe segment, VDSC believes it is the segment with the least dependence on the export market and has successfully recovered on the back of high domestic demand for steel in housing, industrial real estate and manufacturing.

The industry reduced dependence on export markets for galvanised steel sheets. In the first eight months of this year, domestic manufacturers exported 39 percent of their output of galvanised steel sheets, the same figure in 2019 but lower than 46-47 percent in the 2016-2018 period.

Trinh Khoi Nguyen, Vice Chairman of the Vietnam Steel Association (VSA) also predicted that in the short term, the Vietnam's domestic steel market would see higher demand for steel after the social distancing period due to the COVID-19 pandemic.

The domestic production and sales of construction steel were expected to improve from September, he said.

The VSA said that construction steel production in the first eight months of this year reached more than 6.6 million tonnes, down 6.9 percent over the same period in 2019.

Consumption of construction steel products reached more than 6.7 million tonnes, down 5.8 percent year on year, including 906,962 tonnes for export, down 5.9 percent.

At present, steel inventories in the domestic market total more than 604,000 tonnes. This is the average level of inventory to support sales in the following months, the association said.

Meanwhile, VDSC reported that the consumption volume for all groups of steel products reduced in the first eight months of the year, excluding galvanised steel sheets, mainly due to COVID-19.

Hot rolled steel products faced a sharp decline, while construction steel sales dropped nearly 6 percent for the first time since the 2008 financial crisis.

Steel pipe consumption continued to go sideways while galvanised steel output increased slightly year-on-year.

However, VDSC believes that steel demand for industrial production is still relatively strong, while steel demand for construction is suffering the biggest impact from the pandemic.

The number of new projects in the residential and commercial real estate market is still low due to poor medium-term prospects as the international flight ban continues, affecting tourism and international trade activities.

In August 2020, the domestic steel market showed positive signs, when output increased significantly compared to last year, except for cold-rolled steel, according to VDSC. Sales in August were up 15 percent month-on-month. The sales growth was relatively steady month-on-month since the end of social distancing.

The association said in the first half of this year, sales of most steel businesses decreased compared to the same period last year. For example, Vietnam Steel Corporation recorded a 13 percent decrease in revenue,

reaching 15.4 trillion VND; Nam Kim Steel Joint Stock Company’s revenue, down 19.3 percent to 4.8 trillion VND; Pomina Steel Joint Stock Company, down 18.4 percent to 5 trillion VND; and SMC Trading Investment Joint Stock Company, down 17.7 percent to 7.1 trillion VND.

Meanwhile, Hoa Phat gained revenue growth of nearly 30 percent to 39.7 trillion VND and Da Nang Steel Joint Stock Company’s revenue increased by 22 percent to 605.3 billion VND.

Hoa Phat's revenue growth came from an increase in sales volume in the Southern market after the Hoa Phat Dung Quat Steel Plant came into operation./.VNA

• [Editor:kangmingfei]