Vietnam's Hoa Phat Anticipates 30% Surge in its Steel Output in 2019

In investors meet held in the first week of Dec'18, Hoa Phat Group's (Vietnam's leading steel manufacturer) chairman Tran Dinh Long has mentioned that the group's steel output is expected to rise to 3.5 to 4 MnT in 2019, an increase of 30% y-o-y basis. This is because blast furnace no.1 of Hoa Phat's Dung Quat steel complex in Quang Ngai province is set to become operational by the end of first quarter of 2019.

In 2018, the group's steel sales are expected to hit 3 MnT, with more than 2.3 MnT being construction steel and 600,000-700,000 tonnes steel pipes. By 2020, after the Dung Quat Steel Plant will become fully operational, Hoa Phat aims to increase its production capacity to 5 MnT which is nearly double that of 20180.

However, one of the key areas of concern for the company is the consumption of steel given the slowing domestic demand in Vietnam. Talking about the business strategy of the company, Mr. Long mentioned the company's strategy to focus more on the export market.

In 10 months 2018, Hoa Phat exported about 200,000 tonnes of steel, accounting for only 8% of total steel output sold. However, in 2019, the company aims to export about 400,000 tonnes of steel out of the total output of 3.5 to 4 MnT, thus export accounting for 10-12%.

Cambodia is the chosen export market by Hoa Phat

With the mission of enhancing export capacity, Hoa Phat has chosen Cambodia as the top priority market for its export activities since 2019 and has completed the opening of its representative office.

Cambodian market has attracted the attention of Hoa Phat Group's management thanks to the rapid growth of construction projects. In 2017, the total value of approved construction projects in Cambodia reached USD 6 billion, an increase of 22% over the previous year.

Another advantage of the Cambodian market for Vietnamese steel companies is the proximity of geography to significantly reduce transportation costs, thereby increasing the competitive advantage of Vietnamese steel here. With its convenient location, Vietnam's steel products can be transported to Cambodia by road, river, or sea transport.

Cambodian steel mills currently only meet 10% of the total demand of more than 2 MnT a year, so the main source of supply for this market comes from Vietnam, China, and Thailand. At present, Vietnam is the largest exporter of steel to Cambodia with a market share of up to 50% and Hoa Phat's target is to occupy a large proportion in this structure.

Besides the export channel, the domestic market, particularly in the south, is also a market that Hoa Phat is aiming at consuming steel from Dung Quat. Clear move to prepare for penetration into the South is the construction of a port in Dong Nai to receive steel from Dung Quat.