Demand for iron ore and steel scrap for steel production is forecast to increase significantly in 2021 compared to 2020. — Photo vasgroup.vn

According to the Ministry of Industry and Trade (MoIT), as governments around the world issued economic stimulus packages of tens of trillions of dollars to revive their economies, the prices of primary materials such as oil and other raw materials increased.

In Vietnam, after a feverish December in 2020 for steel prices, MoIT announced: "The steel market has stabilised and formed a new higher price level."

Prices of finished steel products have remained at more than VND16 million (US$695) per tonne since the start of this month compared to June, when the price for a tonne of finished products was VND2 million lower. Earlier in 2021, the products were listed at VND24 million, causing lots of trouble in the construction industry.   

Statistics from the Vietnam Steel Association (VSA) said most of the raw materials for steel production in Vietnam, except for the production of Thai Nguyen Iron and Steel Joint Stock Company of Vietnam Steel Corporation with an output of about 300,000 tonnes per year, was imported. The association also forecast demand for iron ore and steel scrap for steel production would increase significantly in 2021 compared to 2020.

The association's chairman Nghiem Xuan Da said the iron ore price in May 2021 increased by 2.4 times compared to the price in February 2020. In detail, the price increased from US$86 to $206 per tonne in May. The scrap steel price in May 2021 increased by 1.9 times compared to February 2020 price, from $270 to $ 512 per tonne.

That said, the price of iron ore mined at Thai Nguyen Iron and Steel Joint Stock Company in the same period only increased by 8 per cent.

According to a representative of Hoa Phat Group, the selling price of steel products in the first five months of 2021 increased. Compared to February 2020, the prices of steel billet in May 2021 increased by 62 per cent. The increase was 49 per cent for construction steel prices, and 94 per cent for hot-rolled coil prices respectively.

VSA’s report said local steel production reached more than 15.9 million tonnes of all kinds in the first half, up 37 per cent over the same term last year. In which, steel billet reached 11.1 million tonnes, up 29 per cent.

The report also said consumption of steel products in H1 reached more than 14.05 million tonnes, up 35 per cent over the same period in 2020, in which, steel billet accounted for 10.08 million tonnes, up 29 per cent over the same period in 2020.

MoIT’s has estimated that the production capacity of enterprises in 2021 would be stable and forecast high growth for enterprises with new investment projects that go into products such as Hoa Phat Group and Nghi Son Steel Joint Stock Company.

In particular, for billet products, Hoa Phat Group and Nghi Son Steel Joint Stock Company in 2021 are expected to experience high growth with an expected increase of 38 per cent for Hoa Phat Group and 44 per cent for Nghi Son Steel and 7 per cent for Vietnam Steel Corporation.

For construction steel, the department estimated that Hoa Phat Group's construction steel production output in 2021 would increase by about 42 per cent compared to 2020, Nghi Son Steel Joint Stock Company's production would increase about three times compared to Vietnam Steel Corporation’s output which would be about the equivalent of 2020.

For hot-rolled coil (HRC) products, Hoa Phat Group was expected to produce 2.88 million tonnes, an increase of more than four times compared to 2020 from the Hoa Phat Dung Quat Iron and Steel Production Complex that has just started production.

As an expert in the steel market, Nguyen Van Sua said the supply and demand of steel products will be stable this year with slower growth in the last half.

MoIT forecast by the end of 2021, both prices of finished steel and iron ore would be reduced from the current new prices.

Source: Vietnam News

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The domestic steel price hike has been attributed to a global price increase. To reduce steel prices, production costs need to be cut.

The economic side of steel price

A steel price hike would affect immediately some economic sectors and later the entire economy. The final outcome is that the price level in the economy will go up.