Domestic and foreign steel compete for market share

With so many businesses participating, the Northern steel market has entered a period of fierce competition for market share, especially the "boxing match" between domestic and foreign businesses.

Hoa Phat Group - the main competitor in the northern steel market.

Sharing with reporters, a representative of a steel production joint venture admitted that steel rolling enterprises in the North are competing fiercely on price to gain market share at a time when supply has far exceeded demand and consumption continues to be difficult.

This person cited two steel companies that are offering prices that make other companies struggle to "keep up", namely Hoa Phat and Vinakyoei in the North.

“If the imported billet for rolling costs 11.5 million VND/ton, the rolling stage and related costs add nearly 1.5 million VND/ton to the steel production cost. Meanwhile, there are steel enterprises selling finished rolled steel at 11.8 million VND, which is only a little more than the billet purchase price,” he said.

Acknowledging that fact, Mr. Pham Chi Cuong, who has just resigned from the position of Chairman of the Vietnam Steel Association (VSA), said that currently the most competitive prices in the construction steel market in the Northern region are products of Hoa Phat and Vinakyoei Company in the North.

“VSA cannot intervene in the steel prices of low-cost sellers, because they still sell above production cost and make a profit, not below cost,” Mr. Cuong analyzed.

In the case of Vinakyoei Company in Ninh Binh (initial capacity of 300,000 tons/year, has been operating as a 100% foreign-owned enterprise after acquiring the capital of Vietnamese partner Pomihoa), Mr. Cuong said that because it was the first year of production in the Northern region, the enterprise wanted to introduce the product to the market to get acquainted, so the price was lower than other enterprises.

In the case of Hoa Phat Group Joint Stock Company, according to Mr. Cuong, due to the advantage of large capacity and the ability to produce steel billets from domestic ore, it is understandable that Hoa Phat steel is cheaper.

“Hoa Phat produces steel billets from ore, and the current price of ore in Vietnam is only 1/3 of the world price of ore, so although the output of ore produced is not large (compared to steel billet enterprises in the world), it still has an advantage over domestic enterprises that are producing steel billets from scrap and using electric furnaces. With a production capacity of about 1 million tons of steel billets and more than 1 million tons of rolled steel/year, Hoa Phat is the largest unit of the steel industry in the North, so it is not surprising that it has a higher market share,” Mr. Cuong said, adding that there are currently 12 construction steel enterprises operating in the North, so competition will be much fiercer.

Meanwhile, the South has only 4 operating enterprises, including 3 "giants" with quite even output, namely Viet Steel (Pomina), Southern Steel and Phu My Steel, so "looking at each other" to make the market is also easier. Perhaps that is why construction steel in the Northern market is currently priced at only 12.95 - 13.3 million VND/ton, much lower than the price of 16.1 - 16.2 million VND/ton in the Southern market.

The summary report for the first 9 months of the year of Hoa Phat Group Joint Stock Company also shows that the steel production and trading sector has brought in pre-tax profits of up to 969 billion VND. The mineral exploration, exploitation and metallurgy sector also brought Hoa Phat 106 billion VND in pre-tax profits.

Mr. Nguyen Tuan Duong, General Director of Hoa Phat Group Joint Stock Company, said that Hoa Phat's recent good growth in market share and scale is within the company's predetermined roadmap, plus good management, so it has lower production costs.

With a billet production capacity of more than 1 million tons and a steel rolling capacity of more than 1 million tons, increasing the scale and market share of Hoa Phat is inevitable. However, Mr. Duong also said that to avoid shocking the domestic market in the near future, Hoa Phat will share by selling a part of the billets it produces to steel enterprises in both the South and the North, and at the same time exporting billets abroad, although the profit is not much. "But in the future, Hoa Phat's market share will continue to increase," Mr. Duong sent a message to other enterprises at the recent VSA meeting.

“In the difficult real estate market conditions, many construction projects continue to delay progress, leading to a gloomy domestic steel market. However, with a number of new factories coming into operation such as Hoa Phat Steel, Viet Steel or Vinakyoei Ninh Binh, it is natural that competition for market share becomes more fierce, due to the increased supply,” Mr. Cuong commented.

According to Investment Newspaper