Brightening outlook for Vietnam steelmakers with real estate recovery, infrastructure development: analysts

While Q3 results among Vietnam’s steelmakers are a mixed bag of gradual recovery and continued losses, there are several factors pointing to a brighter outlook for the industry, analysts say.

They cite ongoing infrastructure construction and recovery signs in the real estate sector as two factors likely to boost steelmakers.

Leading steelmaker Hoa Phat Group, listed on the Ho Chi Minh Stock Exchange as HPG, has seen consistent recovery in profit since Q1/2023 after hitting a low in late 2022.

In Q3/2024, the firm recorded net profits of VND3.02 trillion ($119.4 million) on revenues of VND34 trillion ($1.34 billion), up 51% and 19% year-on-year, respectively.

Corresponding figures for the first nine months of this year were VND9.21 trillion ($363.8 million) and VND105 trillion ($4.15 billion), up 140% and 23% year-on-year, respectively.

Thong Nhat Flat Steel JSC (TNS) recorded net profits of VND11 billion ($434,530) on revenues of VND593 billion ($23.42 million) in Q3, triple and up 44% from the same period last year, respectively.

For the nine-month period, it brought in VND2.31 trillion ($91.57 million) in revenue, 3.5 times higher than the same spell last year. Notably, it made VND26 billion ($1.03 million) in net profit, a significant jump from VND120 million ($4,740) recorded in January-September 2023.

TNS attributed the positive performance to its efforts at finding buyers and input materials at reasonable prices. As a result, Q3 output and sales rose 54% and 48% year-on-year, respectively.

Among the Q3 lossmakers was Thai Nguyen Iron and Steel JSC (HoSE: TIS), which incurred a net loss of VND79 billion ($3.12 million), compared to VND194 billion ($7.66 billion) in Q3/2023. TIS blamed the situation on a struggling steel market, steep decline in selling prices while input material prices remained mostly unchanged.

Vnsteel-Thu Duc Steel JSC, a subsidiary of Vietnam Steel Corporation (Vnsteel), posted net losses of VND7 billion ($276,520) in Q3, higher than VND500 million ($19,750) in the same period last year. Increased cost of goods sold and other costs gobbled up its Q3 accumulated profit, which decreased 63% year-on-year to VND3.5 billion ($138,260).

Vnsteel-Nha Be Steel JSC, also under Vnsteel, suffered net losses of VND5.9 billion ($233,060) in Q3 and VND4.8 billion ($189,610) in the first nine months of this year.

Another Vnsteel affiliate, Vnsteel-Vicasa JSC, reported net losses of VND3.3 billion ($130,360) in Q3 and VND1.5 billion ($59,250) in Jan-Sept.

Looking better

Despite the mixed Q3 results, analysts anticipate a rosier outing for steelmakers in the near future.

On October 24, the Ministry of Industry and Trade extended for an additional five years anti-dumping duties ranging from 2.56% to 34.27% on certain flat-rolled iron and non-alloy steel products imported by 24 companies from China and South Korea.

The North-South high-speed railway project, which was discussed by the Politburo on September 18, is estimated to cost $29.1 billion for the first phase.

During this stage, the steel sector is expected to benefit the most, given the requirement for a huge volume of steel and other building materials and the government prioritizing the use of domestic iron and steel, analysts with Yuanta Vietnam Securities noted, pointing out HPG as a stock with good potential.

Meanwhile, analysists with MB Securities (MBS) have assessed that domestic steel prices hold strong recovery potential due to decreasing pressure from Chinese steel imports, especially with the giant neighbor introducing new economic stimulus measures aimed at revitalizing its real estate market. These efforts could drive Chinese steel prices higher, reducing the competitiveness of imported Chinese steel in Vietnam.

Additional factors like increased housing supply and accelerated public investment disbursement are also expected to support domestic steel prices. In Q4/2024, domestic steel companies are likely to see further gains in market share, boosted by the anticipated anti-dumping duties scheduled to be issued in December, the analysts say.

Looking ahead to 2025, the MBS analysts expect the prices of construction steel and hot-rolled coil (HRC) to rise by 7% and 6% year-on-year to $611 and $590 per ton, respectively.

In 2025-2026, construction steel prices may increase by 7% and 8% to $608 and $657 per ton, respectively.

The analysts expect HPG to report net profits of VND2.25 trillion ($89.16 million) this year, up 13% from 2023, mainly driven by an improvement in gross profit margin to around 11% and a 7% reduction in financial costs.