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Production and sales of finished steel products both have growth in the first 6 months of 2024. Photo: HSG

Many businesses turn losses into profits

According to a report by the Vietnam Steel Association (VSA), in the first six months of 2024, finished steel production reached 14.427 million tons, an increase of 10.1% compared to the same period in 2023. Finished steel product sales reach 14.274 million tons, increasing by 14.4 percent compared to the same period in 2023, of which exports reach 4.216 million tons, increasing by 8.6 percent compared to the same period last year.

According to expert, since the beginning of the year, the steel industry has benefited from positive domestic steel consumption due to real estate recovery, and the number of new and ongoing licensing projects tends to improve each quarter.

In addition, growth in the infrastructure sector accounts for 16 percent of the country's total steel demand, especially when the Government is making efforts to promote public investment disbursement and speed up the completion of many key projects.

According to the financial report, the highest profit continues to be Hoa Phat Group Joint Stock Company when it achieved a net profit in the second quarter of 2024 of nearly VND3,320 billion, an increase of 127 percent compared to the same period, the highest profitable quarter since the third quarter of 2022, mainly coming from strong revenue increase, improved profit margin and lower financial costs.

In the first six months of 2024, Hoa Phat recorded profit after tax of nearly VND6,189 billion, nearly 3.4 times higher than the same period last year. At Nam Kim Steel Joint Stock Company, 6-month profit increased nearly 5 times compared to the same period last year when reaching VND460 billion.

Also having impressive growth is Hoa Sen Group Joint Stock Company when the third quarter of the 2023-2024 fiscal year (from April 1, 2024 to June 30, 2024) achieved revenue of VND10,840 billion, increasing more than 25 percent compared to the same period last year; helping profit after tax reach more than VND273 billion, a sharp increase of nearly 20 times compared to the level of more than VND14 billion achieved in the same period of the previous fiscal year.

In particular, Vietnam Steel Corporation (VNSTEEL) has turned losses into profits, from a negative profit of VND281 billion in the first six months of 2023 to a profit of nearly VND176 billion after the first half of 2024 thanks to its to increased revenue, decreased financial costs.

However, profits are still differentiated at smaller-scale steel companies, for example, Thong Nhat Sheet Steel Company's after-tax profit in the first six months of 2024 reached nearly VND19 billion, while in the same period in 2023, the company lost nearly VND3 billion.

Viet Duc Steel Pipe Joint Stock Company recorded a profit after tax of more than VND26 billion, a slight increase compared to more than VND23 billion in the same period last year. At SMC Trading Investment Joint Stock Company, thanks to the positive results of the first quarter of 2024, after the first six months of 2024, SMC still has a profit after tax of VND65 billion, while it recorded a loss of VND408 billion in the same period last year. But SMC's results are mainly due to liquidating assets in the second quarter of 2024 and selling financial investments in the first quarter of 2024, not from core business activities.

On the contrary, many steel enterprises turned from profit to loss. At Tien Len Steel Joint Stock Company, in the same period of 2023, it recorded a profit after tax of more than VND11.3 billion, but through the first half of 2024, it lost more than VND152 billion even though sales revenue still increased but was negatively affected by a sharp increase in financial costs and joint venture and affiliated companies reported losses of more than VND17 billion. Thai Nguyen Iron and Steel Joint Stock Company continued to report a loss in the second quarter with a loss of VND95 million due to difficulties in steel consumption from the market, low steel selling prices.

Challenges from trade defense

According to many assessments, for the whole year 2024, the profits of steel companies will achieve high growth from a low base in 2023 thanks to improved consumption output. The VSA forecasts that Vietnam's steel production activities in 2024 may increase by 10 percent and in 2025 by 8 percent when the demand for steel in domestic economic sectors recovers.

In the latest developments, at the end of July 2024, the Ministry of Industry and Trade decided to investigate and apply anti-dumping measures on some HRC steel products originating from India and China. This is a beneficial decision for domestic HRC manufacturing businesses but is detrimental to many businesses that depend on imported HRC. For example, Hoa Phat is focusing its efforts to put Hoa Phat Dung Quat 2 Iron and Steel Production Complex into operation with the expectation of producing 5.6 million tons of HRC steel per year, increasing Hoa Phat's total crude steel production capacity to over 14 million tons per year.

At the same time, the Vietnamese steel industry is facing the risk of the European Commission (EC) investigating and applying anti-dumping measures on non-alloy or alloy hot-rolled steel products imported from Vietnam.

The big challenge for Vietnam's steel industry is the surplus of HRC steel due to increased imports as well as trade defense measures being strengthened in key export markets. This requires businesses to have effective calculations and business strategies, especially to comply with regulations and proactively coordinate in issues related to trade defense.