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Steel industry: Big fish swallowing small fish
While five steel companies have announced their bankruptcy, and many others have become clinically dead, some big scale steel companies still keep stable growth.
Big companies’ market share expanded
According to the Vietnam Steel Association VSA, in 2011, the steel output decreased by 14.3 percent, while the consumed volume decreased by 15.6 percent in comparison with 2010. The members of the association saw the 1.78 percent in the productivity and 1.55 percent in the consumption level.
Pomina (POM) is leading the domestic steel market, followed by Hoa Phat (HPG), Tisco, VNS and Vinakyoei. All of them are believed to have big advantage in technology. Hoa Phat is a typical example with the output growth of nine percent and the consumption growth of 11 percent in comparison with 2011.
In the context of the decreasing output, the fact that some enterprises still can see their consumption level increasing means that the enterprises have appropriated the “pieces of cakes” of remaining enterprises. This has, of course, resulted in the narrowing of the market shares of the enterprises with less advantages.
VSA has reported that five steel manufacturers declared bankruptcy in 2011, while some others stopped operation, but their death has not been officially declared.
VSA has estimated that the structural steel output would reach five million tons, an increase of four percent over the previous year. Meanwhile, the structural steel capacity keeps increasing, while Pomina would still lead the market in terms of structural steel.
Pomina said that in the first quarter of 2012, the steel mill with the capacity of one million tons per annum (POM 3) would become operational. POM now has big advantages in technology which allows consuming less fuel than other steel mills. According to Pomina, with the new mill, POM would be able to provide enough ingot steel to laminating mills itself instead of importing materials, which allows reducing the production costs.
Difficulties still waiting
In the fourth quarter of 2011, a lot of steel mills incurred loss due to the high input costs and the modest sale price increases. According to HSC, the input costs in the steel industry increased by 25 percent in 2011, while the sale price increased by 17.8 percent only.
HSC has said that in principle, any changes in the policies would only show effects after some more time. The effects to be created by the interest rate fluctuations would be seen two weeks later, which means that the steel consumption decreases would be seen in early 2012.
In the first quarter, especially on Tet holiday, the sales decreased sharply. Steel has been selling better after Tet, but the sales are just equal to 80 percent of that of the same period of the last year.
The continued lackluster real estate market has made people think that the steel industry still cannot see the opportunities to recover and develop. Most of the apartment projects have been halted. The plans to boost exports may help enterprises to keep normal production, but the profits from exports would be lower than from the domestic sales.
The main product of Hoa Sen Company in the domestic market is colored pre-painted galvanized steel, while it exports semi-finished products. Therefore, it cannot earn profits from the galvanization process.
Steel mills have been warned that their production would still face big difficulties in the time to come due to the consumption decreases. Banks have announced the interest rates, but the interest rates are still high at 16.5-17.5 percent. Even when the interest rates go down actually, steel mills would only be able to feel more comfortable from the third quarter.
vietnamnet
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