Steel prices may recover slightly in final months of year: SSI Securities

The last quarter of the year is expected to see a rise in steel prices thanks to positive consumption signs, according to leading broker SSI Securities.

According to the Vietnam Steel Association (VSA), steel output and sales began to rise in July, but the rate of recovery was modest. In July, total completed steel product production totaled 2.4 million tons, a 6.7% increase over the previous month. Consumption totaled 2.2 million tons, representing a 0.8% increase over June and a 9.4% increase over the same period last year.

However, consumption of construction steel fell by 6% in July compared with the previous month and by 18% year-on-year, totaling more than 823,216 tons.

Steel prices are continually falling, with mills seeing their 16th decline since the year began. The price per ton for Hoa Phat's CB240 coil and D10 CB300 rebar is around VND14 million ($588). Hoa Phat, listed on the Ho Chi Minh Stock Exchange as HPG, is the largest Vietnamese steelmaker.

According to broker KIS Vietnam Securities, the third quarter of 2023 will be another challenging period for Vietnamese steel producers as market demand is forecast to remain weak due to the rainy season and falling prices will affect companies’ profit margins.

In contrast, the last quarter of the year is expected to see a rise in steel prices. The research team of SSI Securities projects that the price of steel will either remain unchanged or possibly rise slightly in the last months of the year.

Building activity remains sluggish and the outlook is sluggish for the real estate market, while China's steel demand has not recovered as quickly as anticipated. Hydroelectric supplies have been challenged by the high temperatures in China's manufacturing centers, which has prompted the government to impose power limitations and force enterprises to reduce capacity. As a result, the supply of steel could decline soon.

Tran Trong Nhan, director of EduTrade JSC, a business unit of the Mercantile Exchange of Vietnam (MXV), said that in the context of the Chinese economy's recovery after the pandemic, the construction sector and real estate are being facilitated by the Chinese government to grow in the near future.

China is the world's largest steel consumer, and in 2022 it consumed 1.02 billion tons of steel, accounting for 54% of the world's production. Given that many economies, including China's, are beginning to recover, there will likely be an increase in demand for steel in the upcoming months, he said.