Strong recovery prospects for Vietnamese steel industry

06:00 | 02/03/2021 Industry

(VEN) - The steel industry’s investment in modern technology has increased product quality and paved the way for its post-pandemic production recovery.

strong recovery prospects for vietnamese steel industry
Efforts in public investment disbursement helped boost the steel market

Investment in modern technology

According to the Vietnam Steel Association (VSA), Vietnam is the only major economy of the Association of Southeast Asian Nations (ASEAN) to record positive growth in 2020. The government is now accelerating construction and public investment to promote recovery and further economic development.

Recovered production in the second half of 2020, along with steady growth in disbursing public investment capital, has led to an increase in steel demand. VSA data show that in November 2020, steel production reached more than 2.454 million tonnes, up 4.34 percent over the previous month and up 15.6 percent compared with November 2019. Total sales reached more than 2.455 million tonnes, up 36.88 percent compared to October 2020 and up 20.9 percent compared with November 2019.

According to the SSI Securities Corporation, the increase in steel consumption in the latter half of 2020 was due to pent-up demand from the first quarter as well as stable consumption in civil construction.

To respond to changing market requirements, many steel companies have accelerated their innovation and investment in technology and quality management systems to improve productivity and quality.

For example, the Vietnam Germany Steel Pipe Joint Stock Company (VG PIPE) has invested in a modern production line of steel pipes and cold rolled and galvanized sheet metal. VG PIPE has expanded its production and applied advanced technology from European countries and Japan with a high rate of automation for 38 steel production lines. The company’s products are manufactured according to Vietnamese standards (TCVN), Japanese standards (JISG 3112), American standards (ASTM) and standards of other advanced countries, to meet customer requirements and adapt to the global integration process.

As a result, VG PIPE has affirmed its position among the top four domestic steel pipe producers and sellers in Vietnam, with over 50 percent of its products exported to the European market.

The Hoa Phat Group also pioneered technology innovation and product quality improvement. Its factories operate according to ISO 9001: 2015. All stages of the steel production chain using closed blast furnace technology are strictly controlled, from raw materials to output products, and continue to undergo strict quality control once again before being brought to the market.

Increased demand forecast

According to the SSI Securities Corporation, the steel market is set to follow a positive trend thanks to about VND700 trillion in public investment disbursement in 2020, of which VND200 trillion will be spent on major infrastructure projects such as the North-South Expressway and Tan Son Nhat Airport.

In addition, Vietnam benefits from continued increasing steel demand in China. According to the China Iron and Steel Association, in the second half of 2020, China’s steel consumption increased by 40 million tonnes, a year-on-year increase of about eight percent. In the first half of 2020, Vietnam’s steel exports to China grew nearly 15 times, to 1.06 million tonnes, accounting for about 27 percent of Vietnam’s total steel exports. In the first 10 months of 2020, Vietnam exported 7.99 million tonnes of steel worth US$4.19 billion to more than 30 countries and regions, including ASEAN, China, Chinese Taipei, and the US.

Vietnam also has a great opportunity to attract foreign direct investment (FDI) thanks to its effective control of the pandemic, and low labor costs. Once new FDI enterprises and capital enter Vietnam, the demand for investment in factories and industrial zones will increase, generating higher demand for construction steel and presenting the steel industry with opportunities to promote sales.

Demand for steel is forecast to increase by about three to five percent in 2021 compared to the level of 2020, thanks to the recovery of the domestic macro-economy, as well as investment in infrastructure and the prospect of FDI inflows into Vietnam

Bao Ngoc