Steel enterprises see increase in revenue thanks to exports

	Breakthrough momentum of steel enterprises
	Some steel enterprises face difficulties

Steel production and export increased sharply over the same period last year. Photo: HSG

Exports account for the majority of sales

According to the market situation report in July and July 2021 of the Vietnam Steel Association (VSA), in July, steel production of all kinds reached nearly 2.4 million tons, down 6.4% compared to the previous month but up 13.8% over the same period in 2020. Steel sales reached more than 2.1 million tons, up 7.4% over the same period in 2020. In particular, steel exports in July reached nearly 660,000 tons, up 6% over the previous month and up 55% over the same period in July 2020.

In the first seven months of 2021, steel production reached over 18.3 million tons, up 33.5% over the same period in 2020. Sales reached over 16.1 million tons, up 30.7% over the same period in 2020. Meanwhile, steel exports of all kinds reached more than 4 million tons, a sharp increase of 78.9% compared to the first seven months of 2020.

In the recent business results announcement, Hoa Sen Group Joint Stock Company (HSG) said that in July, galvanized steel sheet exports recorded 123,088 tons, up 20.6%; steel pipe 3,244 tons, down 25% compared to June. Thus, exports accounted for 67% of Hoa Sen's output structure in the past month. Since the beginning of 2021, HSG has exported more than 737,000 tons of galvanized steel, accounting for 67% of the total volume sold. According to Hoa Sen Group Joint Stock Company, with an extensive export channel to more than 87 countries and territories, HSG has signed export contracts until the end of November 2021.

Similarly, in the past half year, Nam Kim Steel Company (NKG) also exported 366,500 tons, accounting for 73% of the total volume of galvanized steel sold.

Experts of SSI Securities Company said that the export channel can help the two enterprises maintain full capacity in the near future despite the prolonged negative impact of the Covid-19 pandemic on domestic demand.

Accordingly, it is expected that the export volume of Nam Kim Steel Company is expected to account for 80% of the total output in the second half of 2021, while HSG is also expected to export more than 130,000 tons/month, accounting for more than 70% of the total output. The main driver of export volume is the US and European markets, which currently have higher profit margins due to the fact that steel prices are about 30-70% higher than other markets, offsetting import taxes and transportation costs. HSG expects the proportion from the US and European markets to increase from 20-30% to more than 50%, while NKG expects 80% of the company's export volume to come from these markets in the near future.

With Hoa Phat Group (HPG), SSI assessed that although the Covid-19 outbreak may put pressure on output and average selling price in the short term, Hoa Phat's profit in the second half of the year is still positive thanks to the increased demand for hot rolled coil (HRC), as the export of finished flat steel (galvanized sheet and steel pipes) of Vietnam is expected to maintain strong growth in the next two quarters. In the first seven months of the year, HPG's galvanized steel sheet products recorded good growth when reaching 188,000 tons, 2.7 times higher than in the first seven months of 2020; exports accounted for 55%.

Worried about lack of domestic supply

Explaining the reason for boosting exports, VSA said that the Covid-19 pandemic with a new variant had complicated developments, negatively affecting industrial production in July and May of 2021. Moreover, the pandemic has also caused a halt in basic construction activities from industrial to civil, and a sharp drop in domestic steel consumption. Therefore, it is necessary for steel enterprises to promote the expansion of export markets, help boost production, improve investment efficiency, create jobs for hundreds of thousands of employees and help to collect foreign currency and diversify the market.

Ms. Trang Thu Ha, Chief of VSA's Office, added that businesses in the South faced difficulties due to the pandemic and construction stagnation, so the recent growth was mainly from exports.

According to the industry outlook report for the last six months of the year, experts of VNDirect Securities Company said that steel demand in Europe is forecasted to increase by 10.2% in 2021 and 4.8% in 2022. Besides, Vietnamese steel producers will benefit from the European Union's (EU) trade defense against steel imports with a focus on India, Turkey and South Korea. Meanwhile, social distancing is being strictly applied in the southern provinces which account for 34% of construction steel consumption.

Although enterprises said that there is still enough supply for the domestic market, steel prices have increased sharply, so the fact that steel enterprises which promote exports created concerns about supply shortages, which increased steel prices when the whole country recovered after the pandemic.

Faced with this situation, Minister of Industry and Trade Nguyen Hong Dien issued Directive No. 10/CT-BCT dated August 23, 2021 on strengthening the management of export and import of a number of products to support the activities of domestic production and consumption. The Ministry of Industry and Trade requested VSA, Vietnam Steel Corporation and enterprises producing and exporting iron and steel, iron ore to review and consider issues related to input materials, reducing production costs to reduce product costs, take measures to increase steel production capacity to meet the maximum domestic demand, limit the export of domestic products and products that are in high demand.

Recently, to stabilize the above situation, the Ministry of Finance has published a draft Decree amending and supplementing the Export Tariff, Preferential Import Tariff, List of goods and absolute tax rates, mixed tax, import tax outside the tariff quota. For the steel industry, the Ministry of Finance proposes to increase the export tax on steel billets (groups 72.06 and 72.07) from 0% to 5% and reduce 5-10% of the MFN import tax rate of some types of iron and steel.

This agency explained that the adjustment of these tax rates is to contribute to stabilizing the supply of steel billets for the domestic market, stabilizing prices in the market and limiting the export of steel billets to keep domestic production, ensuring the sustainable development of the steel industry in the long term.