Steel sector set to recover later this year

This potential recovery is also largely thanks to the government's various economic stimulus programmes for the real estate sector, the interest rate subsidy, and the acceleration of public investment.

In addition, steel consumption this year might exceed 21 million tonnes, up over 6 per cent on-year, of which the export of finished and semifinished steel items could see a 12 per cent jump, reaching about 13 million tonnes.

Nguyen Viet Thang, CEO of steel giant Hoa Phat Group, believes the steel sector will jumpstart production in 2024 after falling last year, before continuing its momentum into next year.

"The real estate market is expected to rebound in the second half of the year, which will be instrumental to the recovery of the steel industry. So far this year, Hoa Phat has increased its production output by more than 10 per cent," said Thang.

Viet Dragon Securities JSC (VDSC) estimates that Hoa Phat could post a 22.5 per cent jump in revenue to approximately $6 billion for the year, while its post-tax profit could jump by over 90 per cent to $454 million.

Similarly, VDSC forecasts Hoa Sen Group, another top steelmaker, to see a 16 per cent hike in revenue to reach $1.53 billion with post-tax profits of around $35 million for the fiscal year, exceeding the expectations of the company's own business plans.

Galvanised steel sheet manufacturer Nam Kim Steel JSC should see a return of around $1.2 billion in revenue and $11.3 million in post-tax profit, up 14 per cent and more than 85 per cent on-year respectively, according to VDSC.

VDSC has suggested that the expected growth in the steel industry is dependent on a potential recovery in domestic demand for construction steel, with the possibility that the subsequent high prices would contribute to the improvement in the accrued profit margins of firms in the industry.

The securities firm agrees with the VSA that the steel industry is set for double-digit growth in output, as after a period of restructuring and legal moves, a wide range of real estate projects are set to resume construction, aided by an accelerated implementation of public ventures.

Nguyen Duc Hoang, senior analyst at Bao Viet Securities JSC, suggests the Chinese government is taking determined measures to aid a rebound of its domestic real estate market, such as lowering interest rates and reducing the compulsory reserve ratio for banks.

“We expect that China’s anticipated property market rebound in the second half of this year will help boost steel consumption. This will reduce oversupply and soften the export pressure in the steel industry. As such, we expect improvement in steel consumption and prices in Southeast Asia, which should boost the profit margins of Vietnamese steel firms for the year,” said Hoang.

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