Vietnam: Imported ferrous scrap offers witness mix trend w-o-w; slow scrap import amid weak steel sales

Imported ferrous scrap prices displayed a mixed trend w-o-w, as fluctuations were seen in US-origin HMS (80:20) bulk scrap prices, which experienced both declines and rises. Meanwhile, Japanese H2 offers increased by $5-8/t w-o-w. This trend coincided with the stable-to-declining trend of ferrous scrap imports into Vietnam, driven by sluggish sales of finished steel products and a depreciating Vietnamese currency.

Consequently, domestic supply sufficiently met Vietnamese steelmakers' demands, reducing the need for seaborne scrap. Japanese-origin H2 grade scrap was offered at $380-$385/t CFR, but bid prices for steel scrap from Japan dipped to $365-370/t by the end of last week creating a significant bid-offer gap of $15-20/t. Additionally, there were no inquiries for HS-grade scrap, signalling a stagnant market in Vietnam.

Vietnamese steel mills preferred domestic scrap due to limited restocking demand, with current prices for domestic heavy melting scrap estimated at $355-360/t. Tighter scrap availability led to a slight uptick in US offers of bulk HMS (80:20) to $390-395/t CFR Vietnam, while Australian offers remained steady at $380/t. Bids for HMS (80:20) were the same at $375-380/t CFR Vietnam.

Domestic scrap prices, specifically for "Type 1" or H2-equivalent 3-6 mm scrap, remained stable in both northern and southern Vietnam. However, high scrap inventories from pre-Lunar New Year purchases and subdued downstream steel demand slowed scrap consumption. While there was a slight improvement in the downstream market compared to the previous year, it remained weaker than anticipated, post-holidays.

GDP growth in Q1CY'24: As per a local news agency, Vietnam's GDP grew by a strong 5.66% in the first quarter of 2024, exceeding expectations. This is the fastest Q1 growth in four years and signals a positive start to the year. Foreign trade is booming, jumping 15.5% to $178 billion. Strong demand for electronics and mobile phones is a key driver. The semiconductor industry is thriving, with revenues rising and expected to continue growing. Foreign direct investment (FDI) is up 13.4% y-o-y, reaching $6.12 billion. This is expected to boost GDP, employment, and construction. Many experts are optimistic about Vietnam achieving its 6-6.5% GDP growth target for 2024. However, inflation is a growing concern, rising from 3.37% to 3.77% in the first quarter. Further increases in oil and other goods are expected. Credit growth (0.26%) is slow due to cautious consumers and businesses. Legal hurdles in the real estate market and slow productivity improvements are long-term challenges.

Outlook

Sources reported a bleak market outlook, attributing declining steel prices in both China and Vietnam to reduced demand. The quietness of the Chinese market during the Tomb Sweeping holiday added to the challenges faced by Vietnamese steel sales. Furthermore, the situation was exacerbated by a falling exchange rate, with the Vietnamese dong weakening against the US dollar.