Vietnam's steel industry to record profit growth in 2025 on rising domestic demand: broker

Vietnamese steel makers are expected to continue recording positive profit growth in 2025, but at a lower pace, according to leading broker SSI Securities.

The broker expects domestic steel demand to increase by 10% year-on-year in 2025, as the real estate market saw a strong recovery in 2024 with new apartments launched for sale doubling compared to 2023.

Acceleration of public investment disbursement in the final year of the 2021-2025 plan will also help boost steel consumption. Large infrastructure projects include expressways (North-South and East-West), airports, seaports like Can Gio port in Ho Chi Minh City and Nam Do Son port in Hai Phong, and railways.

Export might slow down due to an increase in tax barriers globally. According to the World Steel Association, global steel demand is expected to recover by 1.2% in 2025 after a decrease of 0.9 % in 2024.

Demand from key export markets, such as Europe, the U.S. and ASEAN, is expected to rise by 2-3.5% year-on-year due to expectations of global monetary policy easing.

But according to the World Steel Association, China's steel demand is expected to decrease by 1% in 2025, after decreasing by 3% in 2024. China's construction industry is expected to continue facing many challenges in the context of revenues of real estate and new construction projects dropping by 14.3% and 23% respectively in the 11 months.

Steel exports may also face more pressure from protectionist policies globally. One of the notable cases is the US Department of Commerce's anti-dumping investigation on corrosion-resistant steel (CORE) imported from Vietnam, along with nine other countries, according to SSI Securities.

The U.S. accounted for 14.4% of Vietnam's steel exports in the first nine months of 2024, behind Europe (22.4%) and ASEAN (25.2%).

Competition from China needs to be closely watched, the broker noted. China's steel exports hit a nine-year high of 11.2 million tons in October, up 40.8% year-on-year and 10.1% month-on-month, before going down to 9.3 million tons in November. Export output increased by 22.6% to 101.15 million tons in the first 11 months of 2024 after surging 36% in 2023.

Although Vietnamese steel producers were still able to increase exports over the past two years, the continuous increase in Chinese steel exports put downward pressure on steel prices and triggered a wave of global protection measures globally.

Vietnam Steel Association (VSA) members reported construction steel demand increased by about 12% year-on-year in the first 11 months of 2024 to reach 10.9 million tons. Demand for galvanized steel reached 5.05 million tons, up 32.8% year-on-year,on an export growth of 43%.

The steel pipe segment is quite stable in the companies SSI researched, with an average increase of 4.8%. Meanwhile, HRC output remained stable, as domestic sales recovered by 28%, offsetting the 31% decline in exports.

Hoa Phat Group (HoSE:HPG) is likely to benefit the most from the recovery of the real estate market, accelerated disbursement of public investment, and protectionist policies, SSI Securities reported.

Moreover, construction steel and HRC of the group are less dependent on exports with exports accounting for only 20% and 35% of total output in the first 11 months of 2024, compared to 56% for galvanized steel.

HSG's profit is expected to increase 37% to VND700 billion ($27.5 million) in 2025, mainly thanks to stable gross profit margin after a big loss in Q4 of its 2024 fiscal year (July-September).

Growth motivation is expected to come from the recovery of steel prices and higher domestic consumption.

In a report released in late December, VPBank Securities (VPBankS) wrote that Vietnam's listed steel companies are forecast to see robust profit growth in 2025, with earnings surging by 44.1% year-on-year.

The optimistic outlook is driven by expectations that steel prices have bottomed out and domestic consumption will provide steady support to sales volumes, it said.