Steel enterprises with year-end business problems

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Steel companies are expanding their business activities to compensate for the main business segment in need. Photo: Hoa Phat Company's container export activities

Keep struggling to make up for the loss

The profit picture of steel enterprises in the first half of 2023 doesn’t reveal bright signals when profits go down and most businesses are still struggling to cover their losses.

Specifically, in the first 6 months of 2023, the financial report of Hoa Phat Group said that revenue reached VND 56,665 billion, down 30% compared to the same period last year and profit after tax of more than VND 1,830 billion, down 85% compared to the same period in 2022. Vietnam Steel Corporation – JSC recorded a net loss of 284.3 billion dong in the second quarter of 2023 and a loss of 216.4 billion dong in the first 6 months of the year, while the same period in 2022 reached twice respectively, a loss of 39.5 billion dong and a profit of 155.4 billion dong.

The heaviest loss was SMC Trading Investment Joint Stock Company when it lost nearly VND 393.3 billion in the first 6 months, while it recorded a profit of VND 125.7 billion last year; In the second quarter of 2023, SMC lost more than 414 billion dong. Thai Nguyen Iron and Steel Joint Stock Company (TIS) also suffered a record loss of 98 billion dong in the second quarter of 2023, marking the fourth consecutive quarter of losses. In the first 6 months of the year, this company lost 117 billion dong after tax.

Hoa Sen Group (HSG) made a net profit of just over 14 billion dong in the third quarter of 2023 according to the financial year from October 1, 2022 to September 30, 2023, a sharp decrease compared to the second quarter of 2023 with a profit of 251 billion dong. The reason is that sales revenue and financial revenue both decreased. In the 9 months of the financial year, HSG still has a net loss of 410 billion dong.

According to the forecast of the World Steel Association (WSA) at the end of May 2023, global steel demand will start to recover in 2023 after falling 3.2% in 2022. Global steel demand will keep the uptrend, although the rate of growth will slow down. According to VSA, weak steel demand in most regions of the world and negative sentiment have affected the selling price of finished steel. Moreover, the domestic demand for construction steel is weak, so factories compete continuously, adjusting selling prices gradually. In addition, the real estate market has not shown a positive signal, and social housing projects have not been implemented yet.

According to data from VSA, accumulated in the first 6 months of 2023, construction steel production reached nearly 5 million tons, down 25.5% over the same period in 2022. Consumption volume reached nearly 5.1 million tons, down 22. .7% over the same period in 2022, of which, exports reached 831,000 tons, down 38%. A representative of VSA said that this is a difficult situation for the entire steel industry have to suffer from drawbacks sụch as continuous price decrease from the beginning of the second quarter until now, low domestic and export demand has forced businesses to cut production.

Expectations from public investment and production expansion

According to experts and businesses, these end-year months are the adequate time for many steel enterprises to "launch" when public investment and construction activities take place strongly across the country. According to the Ministry of Finance, disbursement of public investment capital in 7 months of the plan in 2023 increased much compared to the same period in 2022, estimated at 35.17% of the plan. Meanwhile, the target set by the Government and ministries, branches and localities is to disburse 95% of the public investment capital plan in 2023, which is a great opportunity for steel enterprises to bounce back.

According to Mr. Pham Quang Anh, Director of the News Center of the Commodity Exchange of Vietnam (MXV), iron and steel is an important material for construction projects and highway works. Therefore, the growth of public investment activities and infrastructure will contribute to solving the output problem and create favorable conditions for the growth of the domestic steel industry. Difficulties are expected to ease in the year-end period, especially in the fourth quarter of 2023 because this is a period of high demand when construction works rush to speed up progress.

In addition, businesses also expect the real estate market to gradually recover by the end of 2023. Mr. Pham Cong Thao, Deputy General Director of Vietnam Steel Corporation, said that there are many challenges faced by the steel market in the coming time. Therefore, the Corporation continued to direct the units in the system to promote the initiative, dynamism, creativity and decisiveness in the management of production and business in order to control the situation overcome difficulties, strive to complete at the highest level the assigned plan, and at the same time actively prepare necessary conditions to take advantage of opportunities when the market recovers.

Besides, steel enterprises also have to make efforts to increase revenue from supporting fields. For example, Hoa Phat Group said that it is focusing on implementing the project of Hoa Phat Dung Quat 2 Iron and Steel Production Complex. In addition, Hoa Phat will optimize production management and expand the market in order to achieve the container product design capacity in phase 1 soon, taking advantage of opportunities from the logistics market for Hoa Phat Container Production Joint Stock Company. In early August, this company exported a shipment of 100 20-foot containers to foreign partners.