The Vietnamese steel inventories suddenly dropped in Q2/2023
Steel NewsDate: 18-09-2023 by: Ngan Le
According to an estimate, the total steel inventory of the Vietnamese enterprises on the stock exchange is worth about 61,000 billion dong (approximately 2,5 billion USD). Compared to the beginning of the year, the total inventory suddenly dropped sharply by VND 7,000 billion, which is also the lowest milestone in the past nine quarters.
Vietnamese enterprises simultaneously reduce steel inventory
Until now, all Vietnamese steel enterprises have announced their business performance in the second quarter of 2023, and an overview of the domestic steel industry in the first half of 2023 is gradually revealed. According to statistics, the total Vietnamese steel inventory on June 30 was only about VND 61 thousand billion dong ( ~ 2,5 billion USD). Compared to the inventory in the first quarter, the current inventory has sharply decreased by 7000 billion VND (289 million USD). This is also the lowest since the first quarter of 2021.
In fact, after the period when inventories peaked at more than 110,000 tons in the second quarter of 2022, the domestic steel enterprises actively reduced their stockpiles. The top three steel companies showed a substantial decrease in inventories, including Hoa Phat, Nam Kim, and Hoa Sen with a decrease of 2300 billion dong, 1250 billion dong, and 1150 billion dong.
The steel inventory of Vietnamese enterprises quarterly from 2021 to 2023
Specifically, Hoa Phat reported that the steel inventory on June 30 was only 32,261 billion VND, a slight decrease of 7% compared to the first quarter of 2023 and 50% lower than last year. Similarly at Nam Kim, steel inventory was recorded at VND 5,380 billion and decreased by nearly 27% compared to the first quarter of 2023. Inventories at Hoa Sen also showed a sign of decrease to VND 6,200 billion, down 10% compared to the end of Q1/2023 and halving against the end of Q2 last year.
Beyond the top 3 giants in the steel industry, the inventory of most other steel companies such as VNSteel, Tisco, SMC, etc. is downward. It is known that the increasing steel price trend in the first 3 months of the year has partly made businesses reduce the provision for devaluation of inventories. However, the price trend showed signs of reversal, and it continued to decrease since April, which again has caused many steel enterprises to be under pressure to prevent the devaluation of inventories soon.
The prospects for recovery of the Vietnam steel industry
Although currently, the amount of steel inventory at enterprises has decreased, this data does not precisely reflect the situation of domestic steel consumption. Weak demand has remained unsolved since the beginning of the year, especially when the real estate market still has not had many remarkable projects.
The chart shows the total Vietnamese steel inventory from 2021 to 2023
According to information from the Vietnam Steel Association (VSA), in the first half of this year, sales of finished steel products reached nearly 12.5 million tons and decreased by 17.5% over the same period in 2022. The total 80% of steel sources consumed in the domestic market come from HRC and construction steel. The rest are galvanized steel and steel pipes. The weak demand for steel with the surplus of goods at factories has led businesses to lower prices to stimulate consumption continuously.
Vietnam's export market in the first half of 2023 is considered to be unexpected. The cause is directly due to weak consumption demand and competitive pressure from Chinese steel sources. HRC and galvanized steel products are still the primary sources of export goods. However, the sharp decline in steel demand in many places worldwide has led to a decrease in Vietnam's export steel output. Besides, domestic enterprises also have to compete for cheap steel products from Chinese enterprises when this country continuously lowers export steel prices.
In the gloomy context of the current civil construction projects in the real estate market, many steel enterprises expect public investment projects to stimulate the demand. Assessing the prospect of steel recovery, VSA believes that the steel demand can recover significantly and have strong transitions in the period 2023 - 2024. Thereby the recovery will help the profit margins of businesses in the industry improve positively.
Write a comment