Nam Kim, Hoa Sen and Hoa Phat enterprises are forecasted to be able to maintain the scale of revenue and profit into 2022 based on the fact that steel prices are returning, with the main reason coming from the conflict between Russia. and Ukraine.
Vietnamese steel will benefit in the EUThe war between Ukraine and Russia can disrupt the world’s steel supply, leading to a supply shortage and increasing steel prices:
Russia is a major steel exporter in the world, especially in the European market (accounting for 15% of the export market share to the EU, along with two related countries, Ukraine and Belarus, the total steel exports of these three countries to the EU). The EU accounted for 38%.
In the EU, Russia and Ukraine are the 2nd and 4th largest steel exporters to the region, respectively, in the first 11 months of 2021 with about 21% of total output, according to Eurofer.
Therefore, VBCS believes that when the world starts to implement sanctions against Russia, it will lead to a sharp supply shortage while steel demand is still recovering quickly in 2022 after the COVID-19 pandemic.
Besides, right after the conflict showed signs of escalating from February 24, some leading steel producers in Ukraine (including Metinvest and ArcelorMittal) planned to cut production output to the maximum level. minimized due to delays in rail and port traffic. While Russian exports are in danger of being embargoed by many countries.
This will create opportunities for manufacturers to export steel from other markets, such as Nam Kim Steel Joint Stock Company (Code: NKG), Hoa Sen Group JSC (Code: HSG) with revenue growth during the year. 2021 will mainly come from exports to the EU market.
Steel prices and steel production costs will also increase due to higher prices of energy commodities. Currently, Russia is also an important exporter of energy products in the world.
Oil, gas and coal prices are increasing rapidly and are almost back to the old peaks set in 2021, which causes steel production costs to rise again.
In addition, if sanctions target Russia’s energy exports, it will lead to a shortage of energy supplies to Europe.
The return of steel prices will help countries with low steel production costs like Vietnam benefit, and the increase in steel prices will help Nam Kim, Hoa Sen and Hoa Phat Group JSC (Code: HPG) enjoy. profit.
VCBS highly appreciates the possibility that Nam Kim, Hoa Sen and Hoa Phat enterprises can continue to maintain their revenue and profit scale into 2022 based on the fact that steel prices are returning with the main reason for the coming years. from the conflict between Russia and Ukraine.
VNDIRECT Securities Joint Stock Company also believes that Vietnam’s leading steel exporters have the opportunity to increase output in the near future.
The proportion of steel exported to the EU increased sharply
According to data of the Vietnam Steel Association, the EU ranks third in the top of Vietnam’s steel export markets, accounting for 13% of the proportion (equivalent to 1.6 million tons) in 2021. This number increases to more than 10 percentage points compared to 2020 (2.86%).
In its annual report for 2020 – 2021, Hoa Sen said that the EVFTA Agreement will continue to have a positive impact on trade activities between Vietnam and the EU when the growth of two-way trade turnover in 2021 remains stable compared to that of the EU. in 2020, while the export of iron and steel of all kinds is the item with the highest increase in export turnover.
Last year, both Nam Kim and Hoa Sen took advantage of the shortage in steel supply in the European market for export.
This helps Nam Kim to record a net revenue of VND28,173 billion and a net profit of VND 2,225 billion in 2021, 2.4 times and 7.5 times higher, respectively, in 2020 and far exceeding the set plan.
Or with Hoa Sen, revenue is 48,727 billion VND, up 77% in the financial year 2020-2021 (from October 1, 2020 to September 30, 2021). Profit after tax was a record high of 4,313 billion, 3.74 times higher than the previous year and 188% of the plan set by the general meeting of shareholders.
Right from the beginning of this year, the activities of exporting steel to the European market of large enterprises have also started to be active.
In early February, Hoa Phat Dung Quat Steel Joint Stock Company signed a contract to export the first batch of hot rolled coil (HRC) to Italy with a volume of 35,000 tons. The first order of the year going to Europe opens up a large consumption market for Hoa Phat Group’s products.
With HRC products, Hoa Phat Group is currently giving maximum priority to the domestic market, because Vietnam still lacks millions of tons per year.
In 2021, Hoa Phat Dung Quat Steel has supplied to the market 2.6 million tons of HRC steel, of which the export volume accounts for less than 30,000 tons.
The export promotion helps Hoa Phat diversify its consumption markets while the domestic market is affected by the COVID-19 pandemic, and at the same time contributes to foreign currency collection and balance of Vietnam’s trade balance.
“Many foreign customers are wanting to order HRC, but Hoa Phat has not been able to meet all the needs of the market.
This is also the motivation for the Group to promote the implementation of the Hoa Phat Dung Quat 2 Iron and Steel Complex project, focusing on producing hot rolled coil with a capacity of 5.6 million tons/year. When completed, Hoa Phat’s steel production capacity will reach about 14 million tons/year, including 8.6 million tons of HRC”, Hoa Phat said.
With Nam Kim, in 2022 the company is expected to add 200,000 tons of plating removal capacity thanks to the expansion of the factory in Binh Duong and the restructuring of the warehouse. In June last year, Nam Kim completed the purchase of an additional 5 hectares of factories in Binh Duong when acquiring Dea Myung company for about $5.5 million, in preparation for the expansion of the existing bleaching line.
Currently, the price of HRC steel in Europe is currently in a recovery trend after a sharp decline at the end of last year.
HRC steel price movements in Europe in the period 11/2 – 3/3 (Euro/ton, source: Steel Orbis)
However, VBCS commented: “It should be noted that currently the EU still imposes import tax on steel based on export quotas, so the growth in export output of Vietnam in 2022 will not be as high as in 2021”.
T&G International Joint Stock Company
Address: 352 Hue Street, Le Dai Hanh Ward, Hai Ba Trung District, Hanoi
Hotline: 0345786803
Email: hrm@tginterjsc.com
Website: http://tginternationaljsc.com
