Vietnam's steel exports rise 10% y-o-y in Jan-Jun'23

• Exports reach 4.78 mnt in H1CY'23
  
  
• Shipments to India rise sharply on lower prices
  
  
• Large mills ramp up exports amid tepid domestic demand
  
  

Morning brief: Steel exports by Vietnam rose 10% y-o-y in H1CY'23 (January-June, 2023) to 4.78 million tonnes (mnt) as against 4.35 mnt in the corresponding period of last year, as per SteelMint data.

Vietnam's finished steel production during the period stood at 13.1 mnt, down 20.9% over the same period in 2022. In 2022, production of finished steel products totalled 29.3 mnt, down 11.9% y-o-y, of which hot-rolled steel products reached about 18.2 mnt.

Country-wise exports

Italy and Cambodia were the top importers of Vietnamese steel in H1. Italy's imports reached 660,000 t, an increase of nearly 70% compared with H1CY'22. However, shipments to Cambodia dropped around 15% on the year to 560,000 t.

The other leading export destinations of Vietnam were the US and Malaysia with 480,000 t and 470,000 t, respectively. Shipments to both countries increased by around 16% y-o-y.

Notably, exports to India rose sharply to 290,000 t compared with just 10,000 t in H1CY'22.

Data from the Vietnam Steel Association show that in 2022 the ASEAN region was the largest importer of Vietnamese steel, followed by the EU, US, South Korea and Hong Kong.

Why steel exports spiked?

Weak domestic demand: After falling 2.3% in 2022, Vietnam's steel demand still remains fragile due to a stagnant construction industry, monetary policy tightening, exchange rate fluctuations as well as commodity market volatility. This has naturally forced domestic mills to seek out export opportunities. In fact, amid overall decline in domestic production and consumption of steel, exports remain the lone bright spot in Vietnam's steel industry in 2023.

Large mills ramp up exports: The country's largest steel producer with a capacity of 8.5 mnt/year, Hoa Phat Group has raised exports to different geographies, especially EU. It started supplying long steel products to the EU for the first time in December 2022. So, exports have edged up. It is estimated that HRC exports in H1 reached nearly 1.7 mnt. Vietnam will face the EU's tariff rate quotas (TRQ) on a quarterly basis for eight categories of steel. However, Vietnam is exempted from the safeguard measures for other categories of steel, as it is considered a developing country with a steel import market share of less than 3%.

Exports to India surge: SteelMint data show that Vietnam's share in India's steel imports in June rose to nearly 5% from just around 1% in June 2022. The key reason behind increasing shipments from Vietnam is attractive prices - much lower than domestic offers. For instance, in May, domestic HRC prices stood at around INR 55,500-56,000/t exy Mumbai, while offers from Vietnam were assessed at around $570/t on CIF basis - less than INR 47,000/t. Vietnam's exports to India, as a result, increased by a mammoth 1,894% y-o-y in H1.

Outlook

Steel consumption in Vietnam is poised for a gradual recovery in H2. The government is taking measures to complete projects in the civil construction space in the remainder of the year, which is a major consumer of steel. Supply chain disturbances in the auto industry have also largely faded, which should support domestic steel demand.

Moreover, expected lower steel production and exports by China in H2 are likely to support domestic steel production in Vietnam. Monetary easing and government measures to fast-track real estate projects bode well for domestic steel demand. Therefore, SteelMint expects steel exports by Vietnam to edge lower in H2 compared to H1CY'23.