This report profiles Vietnam’s steel industry, discussing market trends and outlook through 2013 and into 2014 and beyond. The report also highlights key leading players in the sector including Pomina Steel Corporation (POM), Hoa Sen Group (HSG), Vietnam Steel Corporation (VNSteel), Thai Nguyen Iron and Steel JSC (TISCO), and Dai Thien Loc Joint Stock Company (DTL).

The steel industry is one of the core industries of Vietnam which support development of the country, especially infrastructure development. Vietnam’s unstable macroeconomic conditions and the impact of global economic slowdown in recent years caused domestic companies to fall into bad situations and brought many of them into the verge of bankruptcy. Vietnam’s steel industry was affected by the negative effects of the following factors: volatile raw material prices, high interest rates and exchange rate fluctuations caused the production cost to go up; tight monetary and fiscal policies caused the demand to drop; and influx of cheap steel imports caused selling prices to remain stagnant.

Vietnam’s steel industry showed signs of recovery in 2013 with steel demand growth of 7.4% y/y to 11.8mn tonnes, making it the third-largest steel consuming country in ASEAN. Vietnam Steel Association (VSA) estimates the growth of domestic consumption for steel products to increase in 2014 amid controlled inflation and interest rate cuts which will lead to higher demand from the construction and real estate sectors. This has also contributed to the recovery of selling prices and declining inventories.

Local steel companies still have trouble accessing bank loans to expand production and many suffer from high financial expenses and low gross margins. Besides, volatile prices and short-term excess of supply continues to exert pressure on profit growth. Potential for long-term expansion of the Vietnamese steel industry is strong, but it still faces a lot of difficulties. Bad debts of banks and the rebound of real estate market will not be easily resolved in the short-term.

Key Points:

• Vietnam’s steel consumption increased 7.4% y/y to 11.77mn tonnes in 2013. As steel demand rises and stock declines, the VSA predicts that the steel industry will record a 7-10% consumption growth in 2014.

• Tight government policies, excess supply and rigid competition from low-priced Chinese imports forced several steel companies to cut their prices and operate below full capacity.

• Steel exports made good progress in recent years with an increase of 17% y/y to 2.5mn tonnes in 2013, mainly attributed to export promotion schemes and attractive prices.