Vietnam’s domestic integrated steelmaker, Formosa Ha Tinh (FHS), has slashed hot-rolled coils (HRC) offers by $60/tonne (t) m-o-m for Sept’21 deliveries. Currently, the mill is offering HRC (skin passes) at $970/t CIF Vietnam, which was around $1,030/t CIF for Aug’21 shipments. However, the mill had rolled over HRC prices for Aug’21 shipments in the preceding month.
Factors leading to the decline in HRC offers
1. Steep drop in imported HRC offers- Imported HRC offers saw a sharp fall, mainly from China and India. Imported HRC offers from India declined by around $100/t m-o-m in July’21 to $930-940/t CFR basis as compared to $1,030-1,050/t CFR assessed at the beginning of June’21. Similarly, imported HRC offers from China fell by $60-65/t m-o-m against $985-990/t CFR seen at the beginning of June‘21. Current offers for SAE 1006 from China’s Rizhao are heard at $940/t CFR and those from Indian mills are around $930/t CFR.
2. Active imported HRC bookings from Russia, India- Russian mills had booked positioned HRC cargoes of over 90,000 t to Vietnam at $850-860/t CFR at the beginning of July’21. This occurred after the announcement of an export tax @15% to be levied by the Russian government from 1 Aug’21. Meanwhile, Indian steel mills booked around 90,000 t HRC to Vietnam in the last one week at around $915-925/t CFR for Aug –Sep’21 shipments. Thus, Vietnam importers have procured cheaper HRC cargoes from India and Russia which led to bearish sentiments in the market.
3. Sluggish demand due to monsoon- The seasonally slow period, owing to the monsoon, hit demand in the domestic market. Major construction and allied industries slowed down their procurements due to disruption in operations at sites and in terms of logistics.
4. Rising Covid cases- The impact of rising Covid-19 cases has been a serious concern in the steel hub of Ho Chi Minh City (HCMC). The health ministry reported an increase in cases by 2,015 today (19 July’21) morning, as per media reports. Out of these, 1,535 cases were heard in HCMC and others in the surrounding areas. Quarantine zones and new clusters being found are weighing on the operations in major steel-consuming sectors.
Near-term outlook
Vietnam’s steel imports stood at 1.12 million tonnes (mn t) in Jun’21, up by 18% m-o-m against May’21, as per data compiled by Vietnam’s general department of customs. HRC re-rollers may prefer imports owing to price competitiveness over domestic. However, domestic downstream demand remains a concern.
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