Vietnam’s Steel Industry Faces to Double Risks

Nhat Trung

16:04 25/06/2019

BizLIVE -

The risks firstly are the steel glut because of the steel industry overcapacity in China and secondly, the risk of yuan devaluation can make Chinese steel sold into Vietnam become much cheaper.

Vietnam’s Steel Industry Faces to Double Risks
Vietnam’s steel industry is facing to double risks. For detail, the risks firstly are the steel glut because of the steel industry overcapacity in China and secondly, the risk of yuan devaluation can make Chinese steel sold into Vietnam become much cheaper.
Recently, Nikkei conducted the research with Formosa Ha Tinh Steel or FHS. FHS said that trade fracas can push more inexpensive Chinese-made steel products into Vietnam. Vietnam is South East Asia’s biggest steel consumer. If this scenario becomes true, steel prices can stumble.
Many economists used to say that Vietnam will benefit from trade war but the statement of FHS shows that this may not be all the cases and the Vietnam’s steel industry can suffer.
The Ha Tinh plant is now capable of producing 7.1 million tons of crude steel per year.
In a recent articles, Reuters revealed that China’s iron ore and steel prices have decoupled somewhat in recent weeks, with the raw material still making fresh highs while the finished product trends lower.
While there are solid supply-driven reasons for iron ore’s relative outperformance, the question remains: how is the current divergence likely to be resolved?
Iron ore futures on the Dalian Commodity Exchange closed at 769.5 yuan ($111.20) a tonne on Monday, down slightly from their record close of 787.5 yuan on June 14.
However, benchmark steel rebar contracts in Shanghai ended at 3,716 yuan a tonne on Monday, down 4.8% from their 8-1/2-year peak of 3,905 yuan on May 22.
In year-to-date terms, iron ore futures are up 75%, while steel rebar has gained a more modest 19.4%.
From Nikkei’s own calculation and analysis, in China, steel prices are on the wane as an economic slowdown weakens demand. As a result, concerns are emerging that the global steel industry will again find itself with excess capacity and lapse back into decline, a fate it escaped several years ago.
Vietnam imports more than 8 million tons of hot-rolled coil per year, 40% of which comes from China. With no import tariffs on the product, inexpensive Chinese coil keeps arriving.

NHAT TRUNG

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