As Vietnam’s economy is developing and living standards are rising, the demand for steel among industries has risen a fast pace in the country resulting which within few years, Vietnam has become one of the key hubs for steel manufacturing and trade. In the last two years, many domestic iron and steel makers expanded their investment and increased the supply of iron and steel significantly.
There are more than 100 companies in Vietnam’s steel industry, with the bigger ones being Hoa Phat Steel, Hoa Sen Steel, the Vietnam Steel Corporation, the SMC Steel Company, and the VSC – Posco Steel Corporation (VPS). The biggest investment came from the Formosa Ha Tinh Steel Corporation (FHS), a joint venture between the Formosa Plastic Group, the China Steel Corporation, and Japan’s JFE Holdings, with first-phase investment of more than USD 10 billion.
The country’s crude steel capacity in 2018 stood at around 16.7 MnT, out of which its utilisation rate was about 93%, around 15.5 MnT, whereas finished steel products capacity was at 42.7 MnT and the utilisation rate was at 60%. Out of the total finished steel capacity, long products capacity was the highest at 16.9 MnT and its utilisation rate was 66% followed by cold-rolled steel capacity of 8.76 MnT but utilisation rate of only 44%. The country’s hot-rolled capacity is the lowest at 4 MnT but its utilisation rate was 86% in 2018.
Vietnam – a net importer of steel
China, the world’s largest steel exporter, has seen exports stall due to protectionism in the U.S., Canada, Turkey, Malaysia, Thailand, and Indonesia last year. Subsequently, part of its steel output became redundant and China’s local manufacturers exported their steel to Vietnam.
China significantly influences the local steel industry due to its proximity and prominence as a large-scale steel producer and Vietnam has been the first country in the region to be affected by the anti-circumvention duties imposed by the U.S. on its export of cold-rolled and corrosion resistant steels, as these are produced from input material of Chinese origin. On the other hand, Vietnam’s imports still counted USD 13 billion in 2018, a considerably higher value compared to the export turnover of USD 5.7 billion with the country continuing to run at the risk of becoming a consumption market for the imported steel products.
In 2018, Vietnam imports of finished and semi-finished steel products reached over 20 MnT with the total import turnover reaching USD 13 billion, slightly down by 0.4% in volume but 24% up in value against 2017. The percentage share of China in Vietnam’s total steel imports stood to be the highest at around 46% with 6.27 MnT, followed by Japan (17%), Korea (13%), and Taiwan (11%), India (5%) and Russia (4%).
In terms of exports, Vietnam exported about 7.8 MnT of finished and semi-finished steel, a surge of 40% y-o-y with export turnover reaching more than USD 5.7 billion. ASEAN remained the main export market for Vietnam with a percentage share of 56% (about 3.5 MnT) in country’s total steel exports in 2018.
Further goals to achieve
Vietnam Steel Association has asked the country’s government to use trade defence measures to protect the domestic steel industry from the imports especially from China. It has also suggested the domestic firms to invest in technological advances, improve their governance capacity to increase competitiveness, and study international practices in order to remain competitive in the future.
Hoa Phat Steel has recognized the great potential the southern market holds, as it generates nearly half of the country’s GDP and has consistently strong FDI inflows. The company is anticipated to increase its market share in the south once its Quang Ngai complex opens in 2020, producing 1 MnT of high-quality long steel and 2 MnT of HRC.
Another company, An Hung Tuong is also coming up with a steel mill of 1 MnT by Jun’19 and additional 0.5 MnT capacity by 2020. Nam Tuhan is setting up its steel mill and rolling mill of 0.3 MnT each by 2019. Ton Dong A plans to focus on upgrading product quality and expanding markets, with Pomina Steel JSC to concentrate on the high-end construction steel segment and developing markets from Da Nang to the south.
For many years now the construction sector has been the destination of most steel produced in Vietnam however, in recent years, steel production with higher added value (like coated steel) has increased considerably. New investments, though, have been put on hold due to trade tensions and the consequent uncertainty. Market experts believe that the country should invest in the production of high-end products, like steel for home appliances or the automotive sector, to differentiate its production from Chinese imports. Steel for home appliances and the automotive sector will indeed increase over the next few years, as will the related production of alloy-steel and high-quality flat steel. The automotive sector is now developing strongly in Vietnam and could also have an impact on the metals sector.
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