Exponential Growth in Steel Making
The five-decade old Vietnamese steel industry has caught the attention of one and all in the steel sector with its spectacular growth over the past few years growing at a rate of 21.64% since 2013 till 2016. It is projected to grow almost at a rate of 12%-15% over the five years. However, steelmakers whom team SteelMint met during their recent visit to this country asserted that the growth will be somewhere in the range of 15-18% spanning over the next decade. The total steel output in 2016 stood at 17.5 million ton while the expected steel output for 2017 stands at 19.6 million tons. Vietnam is the largest steel producer and consumer in ASEAN region.
Comprising of BF’s, BOF’s, EAF’s & IF’s it has a total installed capacity of 16 million tons per year of steelmaking and 6.35 million tons per year of iron making.
No. of Units
in 2016 (in MnT)
In 2017 (in MnT)
Source: Vietnam Steel Association
During the period 2013 -2016 not only the steel production grew at a phenomenal rate the steel consumption also grew at 25.7%.
Fueled by rapid urbanization & infrastructural growth the domestic steel demand of Vietnam is shooting through the roof. The per capita steel consumption in the country stands at 195Kg (as in 2015). Vietnam Steel Association (VSA), Vice President Nguyen Van Sua, intimated team SteelMint that there is a huge scope of increasing the per capita steel consumption and bring it to the levels of developed countries of the world.
The imports are likely to grow in 2017-2018 despite the commencement of production by Formosa steel and increased production by other steelmakers owing to increasing demand.
The country will still fall short of about 15 million tonnes of steel in 2020, he further added. Vietnam imported around 18 million tonnes of steel in 2016 and expected to import 16-16.5 million tonnes in 2017.
Team SteelMint at Thai Nguyen Iron & Steel JSC, Vietnam
Scrap Imports Likely to Increase
Considering a significant growth of steel consumption in Vietnam, along with capacity expansion projects, local producers are going to increase import of scrap and iron ore in the near future. Moreover, limited domestic supply and abundant availability of import raw materials, which prices are equal to or even below local ones, is making steel mills keep focusing on imports and strengthen business with overseas suppliers.
Currently, Vietnam’s steel industry is in its early stage of development, with most steel producers being small-scale mills. In particular, the EAF-based method is widely used in Vietnam (around 80% of steel production) as, compared to the BOF steel.
However, after Vietnam imposed a 23.3% safeguard duty on semis imports (steel billet and slabs) in July 2016, the EAF producers were forced to reorient into scrap bookings.
According to Southeast Asia Institute of Iron and Steel, in 2015 Vietnam imported around 2.5 million tonnes of scrap, which is likely to increase to 4.5 million tonnes in 2017. This growth is attributed to increase in crude steel production, which is a result of protective measures imposed by the government on imports of billets and wire rods.
HRC Imports will Continue
Vietnam steel imports recorded an all time high of 18.3 million tonnes in 2016. Flat steel imports contributed about 60-65% of total steel imports, out of which majority was HR coils. HR coils import will continue and unlikely to receive any safeguard duties as there are limited blast furnaces in the country. The trade ministry estimated the country will spend $15 billion annually on steel imports by 2020 to meet rapidly rising domestic demand. The ministry also forecast Vietnam will be short of 15 million tons by 2020 and 20 million tons by 2025.
Statistics show that Vietnam’s steel imports so far meet up to 60 percent of the market demand. Faster economic growth means more steel is needed to make everything from cars to buildings.
However, several companies are looking to set up blast furnaces in order to reduce dependency on imports.
Scope for Technology Suppliers
The Vietnamese steel industry is in a phase of expansion. New production lines are coming up and almost all the steel manufacturers met by team SteelMint have concrete plans for capacity expansion in some cases more than double of the existing.
On one hand, we have companies like Formosa which has become operational in June this year and will be producing high-quality bars, wire rods & HRC, on the other hand, we have companies like Southern Steel which has finalized the expansion of its rolling capacity and Pomina steel which is setting up new cold rolling mill. There is a score of other steel manufacturers like TISCO which has already set the ball rolling for expansion of capacities.
Steelmakers told SteelMint, that the growth of steelmaking in Vietnam is going to be driven by Blast furnace and Induction furnace routes.
Steelmakers like TISCO, Hoa Phat Steel, Hoa Sen Group, Vinausteel, and Southern Steel etc. are looking for: Scrap, Slabs, HRC, Iron ore, Coal, Technology Providers and global buyers.
Risks: The major risks that Vietnamese steel industry is fraught with are :
- Total dependence on externals sources for raw materials
- Small domestic consumer base may lead to quick demand saturation.
- Export possibilities face a stiff challenge from other cheap steel exporting nations.
TOPIC TO BE DISCUSSED AT
3rd Steel Scrap & Raw Materials Conference
Avani Riverside, Bangkok (Thailand)
11-12 September 2017
- Will Vietnam become next Turkey?
- Drivers fueling growth of Vietnamese Steel Industry-2020
- Growth of steel market in South East Asia.
- How will scrap supply dynamics shape up in 2017-2018?
Founder, Hoffman Iron & Steel, Vietnam
Nghiem Xuan Da
Chairman, Vietnam Steel Corporation, Vietnam