Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Vietnam’s Hoa Phat steel group will increase its steel output to 4mn mt by 2020 in order to offset competition from other domestic steelmakers. During Jan-Nov 2019, Hoa Phat steel produced and supplied nearly 2.5mn mt of high quality steel to the market, up 28pc over the same period, including 220,000 mt exports. 


Hoa Phat group’s Dung Quat iron and steel integrated plant will increase steel supply to the domestic market leading to an increase in its market share by almost 1.5mn mt.  


According to KIS Vietnam securities corporation, Hòa Phát will supply 3.88mn mt of steel by 2020, doubling its current market share from 18pc to 35pc. 


The steelmaker plans this expansion in two stages, with the first stage focusing on the finished long products and the second stage for finished flat steel, by mid-2020.  


The Dung Quat complex currently has a total investment of VND 52,000bn ($2.24bn), with a capacity of 4mn mt a year.


Its main products are long steel for construction such as rebar, high quality steel wire rod, and flat products (HRC – hot rolled coils). After the second phase of expansion that would be completed by the mid-2020, the steelmaker will raise its HRC production to 2mn mt per annum.  


As an impact of an additional supply of around 1.5mn mt, estimated to be equivalent to 18pc of total domestic market consumption, there will be short-term oversupply against the current domestic steel demand. 


The weaker steel consumption in both export and domestic markets is likely to impact country’s steel demand growth rate. KIS estimates that Vietnam’s long steel consumption growth will fall to 5.5pc this year and should stabilise by 2020.  


In the first 10 months of 2019, steel exports grew just 6.5pc year on year, down from the 34pc growth registered in 2017. 


Country’s steel exports witnessed a loss in growth rate on the lowering of demand from South Korea and Thailand.


Vietnam’s real estate steel demand has remained slow amid the slower pace of projects in the domestic market. The country’s 90pc of steel consumption comes from the domestic demand. Some of the steel producers have begun to look for new opportunities in other regions or country’s as the situation of oversupply could persists in the market.  


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