2021 is a brilliant year for the construction steel industry when the price continuously peaks, leading to the business results of many giants also breaking old records. Although the market at the end of the year seems to be starting to cool down, the construction steel industry is expected to continue to benefit from the 2022 wave of public investment.
Steel prices set a record because of input material price fever
2021 witnessed a boom in construction steel prices. Accordingly, the price of construction steel from the beginning of the year has broken out from below the mark of 13,000 VND/kg to more than 15,000 VND/kg.
Since then, the price of construction steel has continuously made an opening peak, reaching 17,200 VND/kg in the highest level set in June. Compared to the average in 2020, this year’s construction steel price increased by nearly 20%.
Development of construction steel prices in the first 11 months of 2021 and the years 2016 – 2020. (Source: Vietnam Steel Association)
The main reason for the skyrocketing steel price was the sharp increase in the cost of input materials.
According to the Ministry of Industry and Trade, based on financial invoices provided by steel production units, the prices of imported raw materials of steel factories have increased. In which, the iron ore price in May 2021 increased by 2.4 times compared to the price in February 2020 and increased by 32% compared to December 2020.
Scrap steel prices in May 2021 increased by 1.9 times compared to February 2020 prices and increased by 18% compared to December 2020.
In particular, the construction steel export data continuously increased “equal to times” enough to show how high the demand for this item is this year.
The construction steel price helps many companies in the industry benefit, reflected in the business results in the industry.
Typically, “the leading bird in the industry” Hoa Phat recorded great business results in the first 9 months of the year with revenue of more than 105,800 billion dong, profit after tax of 27,100 billion dong, up 60% and 200% respectively compared to the previous year. with the same period last year.
With this result, the company exceeded 45% of the plan for profit after tax for the whole year of 2021, breaking all previous records.
Currently, Hoa Phat is leading the construction steel market of the country with a market share of about 30-35%.
Pomina Steel Company also recorded a revenue of 9,588 billion dong, up nearly 32% over the same period, pre-tax profit reached 206 billion dong, while the same period last year lost 128 billion dong.
With this result, Pomina Steel has achieved nearly 80% of the revenue target and 34% of the year’s profit after tax plan.
Facing the advantages of the industry, the Vietnam Steel Association in April and May sent a dispatch to member enterprises recommending to increase capacity. VSA also recommends that businesses organize a reasonable distribution system to stabilize domestic supply and meet market demand.
Enterprises have strengthened cooperation and coordination, prioritizing raw materials and raw steel sources for the domestic market. Reduce production costs, at the same time ensure a reasonable selling price to stabilize the domestic steel market price.
The fear of breaking the battle of construction contractors
Steel prices increased sharply during the peak construction season (second quarter), making contractors “shocked” and worried about losses, especially projects that had signed contracts before.
A civil construction enterprise said that most of the works have signed package contracts. Therefore, high steel prices eroded the company’s profits, even suffered losses during the peak steel price period in May and June. As for contractors that have a provision for slippage risk, it seems that the damage is less.
The Vietnam Construction Contractors Association believes that construction contractors across the country are facing the risk of bankruptcy and bankruptcy due to the sudden increase in steel prices.
The association emphasized that all construction contractors faced difficulties, there was no way to solve them because most of the non-state-owned investors used fixed unit price contracts that were not adjusted at the time of signing. except in cases of force majeure).
Therefore, contractors have to deal with this deficit themselves, and budget investment projects must apply the unit price of materials according to the notices of the construction departments, which do not update the variable. timely price action.
The association proposed the Government Office to soon direct relevant ministries and sectors to thoroughly examine the cause, and the Departments of Construction to update the market unit price.
However, the Vietnam Steel Association (VSA) has repeatedly emphasized in its periodic reports that the price of construction steel has completely increased raw material prices and increased demand.
At the 2021 Annual General Meeting of Shareholders on the morning of April 22, Mr. Tran Dinh Long, Chairman of the Board of Directors of Hoa Phat Group, said this is normal.
“Basically, the inspection recommendation of the Association of Construction Contractors is normal and this does not affect Hoa Phat because we are in the period of the market economy. If the inspection does not detect anything unusual There’s no problem with monopolizing the market,” said Mr. Long.
Sales plummeted towards the end of the year
After a period of hot growth, entering the quarter, before the impacts of the COVID-19 epidemic, construction steel prices cooled down.
According to the Vietnam Steel Association, domestic demand for steel decreased when many provinces and cities implemented prolonged social distancing, leading to a decrease in domestic sales. Accordingly, in the third quarter, sales decreased by 40% compared to the second quarter.
In the fourth quarter, sales have not improved. In November alone, construction steel sales reached 872,846 tons, down 26.11% from the previous month and down 31.2% over the same period in 2020.
Source: Vietnam Steel Association
Although the selling price decreased, the price of construction steel did not decrease too strongly, averaging about 16,200 VND/kg, only lower than the peak price of 17,200 set in June of 1,000 VND/kg.
Thus, after a period of unusual price fever (from December 2020), currently, the steel market has stabilized.
The Ministry of Industry and Trade believes that steel product prices have formed a new “ground” according to objective reality.
Expectations in 2022, the steel industry will benefit from the wave of public investment
Despite the sharp decline in sales, the steel industry is expected to continue to benefit from the wave of public investment in 2022.
According to the Ministry of Industry and Trade, in order to recover the economy due to the impact of the Covid-19 epidemic, governments around the world have issued many economic stimulus packages of tens of trillions of dollars, making the prices of primary materials of the world economy (oil prices, raw material prices, material transportation costs) increased.
In the domestic market, according to Vietnam Joint Stock Commercial Bank for Foreign Trade Securities (VCBS), the disbursement plan for public investment for 2020-2021 is at a historic high compared to the average of the previous 3 years, However, the disbursement progress of public investment capital this year is much lower than in previous years of the same period due to the impact of the COVID-19 epidemic.
Therefore, in order to accelerate disbursement of public investment, we believe that the coming time when gradually opening up will speed up disbursement and construction much more and will boost demand for construction materials. .
In addition, many real estate projects that are in the process of project implementation were postponed in the first 9 months of 2021 due to the impact of social distancing along with the continuous increase in the price of construction materials since the beginning of the year. Real estate projects are very difficult to implement. Therefore, the launch of these projects contributes to boosting the demand for construction steel.
According to the Vietnam Steel Association, “Considering the long steel consumption market in Vietnam, the demand has positive signals for civil works and infrastructure, especially large public investment. In the past time, due to the decrease in domestic and imported scrap prices, it has contributed to making traders hesitate to buy goods at the end of the year.”
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