Vietnam steel stocks perform well on positive market outlook

Vietnamese steel stocks have showed strong performance thanks to recent positive developments in the steel market and the company's own stories.

On Tuesday, although the VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), dropped by 1.77 points to 1,727.07, ending a three-day gaining streak, steel stocks still attracted attention, with many seeing positive movements.

HPG of giant Hoa Phat Group rose 0.8% to VND27,900 ($1.1) per share. This surge follows the recent launch of a 300-ton blast furnace by its subsidiary Hoa Phat Dung Quat Steel at the Hoa Phat Dung Quat Steel Complex 2 in the Dung Quat Economic Zone, the central province of Quang Ngai.

The Dung Quat 2 project spans 280 hectares, with a total investment of VND85 trillion ($3.35 billion). The plant’s output includes high-quality hot-rolled coils (HRC) for automotive steel, low-carbon steel used in products like cans and household items, and structural steel, with an annual capacity of 5.6 million tons.

Similarly, HSG of Hoa Sen Group also increased 0.5% to VND19,000 ($0.75) per share. Recently, Hoa Sen announced plans to collaborate with organizations, companies, and individuals to expand its Hoa Sen Home supermarket chain.

The group is looking for about 10 warehouses in various localities across the nation, including Hai Duong, Hung Yen, Danang, Khanh Hoa, Dak Lak, Can Tho, An Giang and Long An, with each spanning between 10,000 to 20,000 square meters, and a lease duration of at least 10 years. This move comes as demand for galvanized steel and building materials shows signs of recovery.

Notably, smaller steel stocks like SMC of SMC Trading Investment JSC and VCA of Vicasa-VNSteel hit their ceiling prices, while TVN of Vietnam Steel Corporation (VNSteel) surged 5.3%.

The positive performance of TVN and VCA was said to be linked to their divestment plans. TVN recently announced its plan to divest 9.87 million shares or 65% of VCA’s charter capital.

The divestment is set to be conducted from November 2024 to the first quarter of 2025 via public offerings, with the starting price of VND24,158 ($0.95) per share, 57% higher than VCA's current market price.

TVN also revealed its plan to divest 2.2 million shares, equivalent to a 20.05% stake in RedstarCera JSC (TRT). According to VNSteel, the value of its TRT shares as of June 30, 2024 was estimated at over VND126.5 billion ($4.98 million), or VND57,358 ($2.26) per share after appraisal. This price is 2.7 times higher than the market price of TRT shares at Tuesday’s close.

Since the beginning of November 2024, TVN has climbed 11.11%, while TRT and VCA surged by 76% and 77%, respectively.

Bright outlook for steel industry

According to the Vietnam Steel Association (VSA), the production of crude steel in September 2024 reached 1.71 million tons, down 4.3% from the previous month but up 3.6% compared to September 2023.

Steel consumption decreased by 6.8% month-on-month and 2.3% year-on-year. Exports of crude steel in September totaled 189,477 tons, down 22.5% from August, but up 17.7% compared to September 2023.

For the first nine months of 2024, steel production reached 16.3 million tons, a 16% increase year-on-year, while consumption hit 15.9 million tons, up 15%. Steel shipments totaled more than 2 million tons, marking a 41% rise over the same period last year.

The VSA acknowledged significant potential in the sector, largely driven by the recovery of the real estate market. An increase in housing supply and public investment has spurred a rebound in the construction steel market.

According to real estate services company CBRE, the supply of apartments in Hanoi and Ho Chi Minh City is expected to increase by 30% and 20%, respectively, compared to last year.

Additionally, the government’s public investment plan is projected to grow 12% year-on-year, reaching VND638 trillion ($25.06 billion), as the government focuses on developing transport infrastructure to support economic growth.

Broker MBS Securities forecast that steel prices, particularly construction steel and hot-rolled coil (HRC), has experienced a positive recovery starting in Q4/2024, as the pressure from Chinese steel imports fell.

The firm estimated that construction steel prices could average $571 per ton in Q4/2024, up 4% from last year, while HRC prices are expected to decrease by 7% to $556 per ton due to ongoing competition from Chinese steel. In 2025, construction steel and HRC prices are projected to expand 7% and 6%, respectively, to $611 and $590 per ton.

Looking ahead to the 2025-2026 period, MBS anticipated construction steel prices could rise by 7% to $608 and by 8% to $657 per ton.

In light of these developments, MBS believed that domestic consumption will remain a key driver for steel market growth over the next two years. Additionally, domestic steel producers stand to benefit from the imposition of anti-dumping tariffs on Chinese imports, expected to take effect in December 2024. Steel companies are still trading below their growth potential in the current steel cycle.