The "catastrophic" time of the steel industry?

The "catastrophic" time of the steel industry?


Stocks of many steel giants such as HPG, NKG (HM:NKG), and SMC are headed to decline in the context that the whole industry has stepped to the other side of the slope and especially when the fear of recession is also confirmed through the message. of the head of Hoa Phat Group (HM: HPG).

President of Hoa Phat Tran Dinh Long. 

At the Annual General Meeting of Shareholders of Hoa Phat Group (HOSE: HPG) not long ago, Chairman Tran Dinh Long admitted that the steel industry is facing many headwinds. “Tragically” is the way that President Hoa Phat talks about the next quarters of the steel industry's business.

“Everyone, please wait for the business results of the second, third and fourth quarters, I think this year's business plan will be difficult. People will see how dire the business results are," said Mr. Tran Dinh Long.

In fact, observers are not unaware that the steel industry has come to an end, but Mr. Long's message makes things look worse. As for those who are raising hopes that the steel industry is still good, this is clearly a "cold water".

And "Mr. Market" immediately became angry, hit the steel stocks group. HPG's stock price sometimes dropped to nearly 33,000 VND/share, a low not seen in more than a year, and NKG nearly 24,000 VND/share.

Compared to the peak in mid-October 2021, the capitalization of many steel stocks has halved, with HPG down 42%, NKG down 46%, HSG (HM:HSG) plunging 56%, and SMC losing 53%.

As does so?

Explaining the difficulties of the steel industry, Mr. Tran Dinh Long pointed out that the sharp increase in raw material prices due to the Russia-Ukraine conflict caused the price of smelted coal to increase by 100-200 USD/ton.

At the same time, steel prices in the domestic market are also on a downward trend recently. In the past 1 month, the price of construction steel in Vietnam has decreased 4 times in a row, down to around 17.2 - 18 million VND/ton.

In the corrugated iron segment, the price of HRC steel (HM: HRC) - the main raw material for corrugated iron production - also dropped sharply. Last week, Hoa Phat announced to reduce the selling price of HRC by about 130 USD, down to 793 USD/ton, while Fomorsa lowered the selling price of HRC to 850 - 855 USD/ton. According to a source from Steelmint, Fomorsa even offers an additional discount of 30 - 50 USD/ton for buyers in Vietnam.

“This steel company is negotiating directly with buyers and offering discounts to certain buyers. It's nothing new because this is a common occurrence before or during a dismal sales season," quoted a source in Vietnam.

Some orders of HRC imported from China are even priced at 745-755 USD/ton (CFR price).

HRC steel price movement of HPG

In addition, steel sales volume also turned down recently. According to a report by the Vietnam Steel Association (VSA), in April, steel sales of all kinds reached 2.42 million tons, down 22.52% over the previous month and down 15.6% over the same period.

Gloomy export market

Besides the weakening of the domestic market, the export market also cooled down after a flash increase at the end of February (the period when the Russia-Ukraine war raised fears of a supply shortage).

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