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STEEL INDUSTRY REPORT Q1/2020
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CONTENT
2
Section Page Section Page
Abbreviations 3 2. Industry value chain 28
Executive summary 5 3. Scale 30
I. Business environment 7 4. Construction steel 34
1. Macroeconomic situation 8 5. Steel pipe 38
2. Legal framework 10 6. Galvanized steel 39
II. Global market 14 7. Import – export 40
1. Definition and classification 15 VI. Planning and forecasts 43
2. Production process 17 1. Planning 43
3. Production 21 V. Enterprise analysis 44
4. Consumption 24 1. Enterprise introduction 45
III. Vietnam market 26 2. Financial analysis 49
1. History of development 27
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ABBREVIATIONS
3
Abbreviation Full written Abbreviation Full written
ACFTA ASEAN - China Free Trade Agreement DBS Development Bank of Singapore
AEC ASEAN Economic Community EAEU Eurasian Economic Coalition
AISI American Iron and Steel Association EAF Electric Arc Furnace
ATIGA ASEAN Trade in Goods Agreement (ATIGA) EVFTA EU-Vietnam Free Trade Agreement
MONREMinistry of Natural Resources and
EnvironmentGDP Gross domestic product
BOF Basic Oxygen Furnace HRC Hot Rolled Coil
Census The United States Census Bureau IEA International Energy Agency
CISA China Iron and Steel Association ITA US International Trade Administration
G&A expenses General administrative expenses JISF Japan Iron and Steel Federation
CRC Cold Rolled Coil JPC Joint Plant Committee
JSC Joint Stock Company CPTPPComprehensive and Progressive Agreement
for Trans-Pacific Partnership
ABBREVIATIONS
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ABBREVIATIONS
4
Abbreviation Full written Abbreviation Full written
KOSA Korean iron and steel Association VSA Vietnam Steel Association
OECDOrganization for Economic Co-operation
and DevelopmentWCA World Coal Association
GDVC General Department of Vietnam Customs WSA World Steel Association
GSO General Statistics Office of Vietnam Co., Ltd Liability Limited Company
ABBREVIATIONS
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EXECUTIVE SUMMARY
5
WORLD
Raw materials:
• World steel supply: World crude steel production in 2019 reached X
million tons, increasing by X% compared to 2018.
Steel consumption demand:
Total steel consumption of Asia always
ranked first in the world in the period of 2011 - 2018
VIETNAM
• It is estimated that in 2019 steel pipe production will reach X thousand
tons and consumption will reach X thousand tons.
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EXECUTIVE SUMMARY
6
Enterprises
Business performance of steel enterprises in 2018 was quite optimistic
but paled in comparison with 2 years ago.
Forecasts
2019 will continue to be a hard year for steel enterprises.
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7
BUSINESS ENVIRONMENT
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Part I. Business environment
1. Macroeconomic situation
8
• Gross domestic product (GDP) the whole year of 2019 is estimated to
increase by X%
• VND/USD exchange rate in 2019 continues the slight upward trend.
Source: VIRAC, GSO
Source: VIRAC
Urbanization rate in Vietnam, 2012 - 2019
Source: VIRAC, SBV
GDP growth rate by quarter, 2016 - 2019
VND/USD, 1/2013 – 12/2019
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Part I. Business environment
1. Macroeconomic situation
9
• Domestic coal supply in the near future will be in great shortage and
continue to be imported.
Source: VIRAC, Indexmundi
Source: VIRAC, GSO
Coal price movements, 2013 – 2019
Coal production output and export volume, 2008 – 2019
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Part I. Business environment
2. Legal framework
10
• Circular No. 101/2015/TT-BTC dated June 29, 2015
• Decree No. 38/2015/ND-CP of the Government
• Circular No. 165/2014/TT-BTC was issued by the Ministry of Finance on January 1, 2015
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Part I. Business environment
2. Legal framework
11
• Ministry of Industry and Trade issued Decision No.1656/QD-BCT
• Joint Circular No. 58/2015/BCT-BKHCN issued by the Ministry of Industry and Trade, and the Ministry of Science and Technology
Country/Territory ProducerOld anti-dumping duty (applied from
October 5, 2014 to May 13, 2016)
New anti-dumping duty (applied from
May 15, 2016 to October 6, 2019)
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Part I. Business environment
2. Legal framework
12
• On March 3, 2016, the Minister of Industry and Trade issued Decision No. 818/QD-BCT
• Resolution No. 1084/2015/UBTVQH13 dated 10/12/2015 of the National Assembly Standing Committee
• Ministry of Industry and Trade issued Circular No. 12/2015/TT-BCT
• Decision No. 1931/QD-BCT
• Decision No. 2754/QD-BCT
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Part I. Business environment
2. Legal framework
13
• Ministry of Industry and Trade issued Decision No. 2968/QD-BCT dated July 18, 2016.
Item
Previous
self-
defense
tariff
Temporary self-
defense tariff
(valid until
October 2016)
Official self-defense
tariff (effective from
02/08/2016)
Official schedule of applying self-defense tariff,
3/2016 – 3/2019
Source: VIRAC, Ministry of Industry and TradeSource: VIRAC, Ministry of Industry and Trade
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14
GLOBAL MARKET
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Part II. Global market
1. Definition and classification
Definition
Classification
22
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Part II. Global market
1. Definition and classification
23
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Part II. Global market
2. Production process
Steel production process
Closed production process model
25
Source: VIRAC,
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Part II. Global market
2. Production process
26
Steel production process
Source: VIRAC, WSA
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Part II. Global market
2. Production process
Process: including 4 basic steps
1) Ironmaking:
26
Chemical reactions in the furnace
Source: VIRAC
2) Steelmaking:
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Part II. Global market
2. Production process
3) Continuous Casting:
4) Rolling:
26
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Part II. Global market
3. Production
38
Source: VIRAC, WSA
• According to World Steel Association (WSA), world crude steel
production in 2019 reached X million tons, increasing by X%
compared to 2018.
World steel production, 2000 - 2019
Source: VIRAC, WSA
World crude steel production, 2011 - 2019
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• Steel is an important heavy industry, the input for many other industries
in the world such as construction, mechanical engineering, automobile
manufacturing, energy, ...
Part II. Global market
3. Production
39
Source: VIRAC, WSA
Top 10 countries by steel production output, 2019
Country 2019 Change (yoy) % Market share
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Part II. Global market
3. Production
39
Source: VIRAC, WSA
Steel production by production method, 2018
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Part II. Global market
4. Consumption
41
Source: VIRAC, WSA
Source: VIRAC, WSA
World steel consumption in 2012 – 2014 increased sharply owing to great
demand, reaching X million tons in 2014.
Total steel consumption of Asia always ranked first in the world during the
period of 2012 – 2018.
Source: VIRAC, WSA
-4%
-2%
0%
2%
4%
6%
8%
1,300
1,350
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
World iron and steel consumption, 2012-2018
Steel consumption in some regions, 2012-2018
Steel consumption by region 2018
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Part II. Global market
4. Consumption
42
Source: VIRAC, OECD
Source: VIRAC, WSA
• Steel consumption per capita varies among regions
• Steel consumption growth rate by sector also differs among
countries and regions.
Construction Automobile Mechanic Metal product Other vehicles Household appliance
Year 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016
Tốc độ tăng trưởng tiêu thụ thép theo ngành giữa các khu vực 2014 – 2016 (%)
Steel consumption per capita, 2018
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VIETNAM MARKET
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• Vietnamese steel industry started from 1959
• In recent years, Vietnam’s steel industry has experienced high growth rate
Part III. Vietnam market
1. History of development
64
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Long steel industry value chainThe current value chain of long steel production in Vietnam includes:
Ore + limestone + coal => Cast iron => Steel refining => Steel casting =>
Steel rolling.
Part III. Vietnam market
2. Industry value chain
66
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Flat steel industry value chain
World flat steel value chain, 2015
Part III. Vietnam market
2. Industry value chain
Source: VIRAC
Source: VIRAC
67
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• As of the end of 2018, the whole country has about X enterprises
operating in steel production,
73
Part III. Vietnam market
3. Scale
Source: VIRAC, GSO
Source: VIRAC, GSO
Enterprises and Labors in the steel production industry, 2014 - 2018
Number of enterprises by region 2018
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Part III. Vietnam market
3. Scale
74
Vietnam’s crude steel production, 2013 – 2019
Source: VIRAC, WSA
In 2019, Vietnam’s crude steel production reached X thousand tons, increasing approximately by X% compared to last year
Source: VIRAC, WSA
Crude steel production in regional countries, 2019
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Currently-invested steel projects
75
Part III. Vietnam market
3. Scale
Source: VIRAC
EnterpriseAdded capacity
Product Location Time
(Ton/Year)
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Consumption
75
Part III. Vietnam market
3. Scale
Steel products consumption, 2019
• Total steel consumption in 2019 reached X million tons,
increasing by X% compared to the same period last year.
Source: VIRAC, WSA
Source: VIRAC, WSA
Steel products consumption, 2013 – 2019
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Part III. Vietnam market
4. Construction steel
74
Source: VIRAC, VSA
Construction steel production, 2013 – 2019Construction steel
According to the latest update of VIRAC, Hoa Phat’s market share in
construction steel has increased by over X% thanks to the rise in the South’s
demand and export volume.
Source: VIRAC, VSA
Self-defense tariff on construction steel, 2017 - 2021Construction steel consumption, 2011 – 9M/2019
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Part III. Vietnam market
4. Construction steel
74
Source: VIRAC, VSA
No. Exempted enterprise No. of exemption
decision
Exempted product Exempted quantity in 2019
(tons)
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Construction steel market share in South and Central
Vietnam 2018, 2019
• In 2019, Hoa Phat improved their market share in long steel,
78
Source: VIRAC, VSA
Part III. Vietnam market
4. Construction steel
Construction steel market share, 2019
Source: VIRAC, VSA
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Construction steel price
• In the first 6 months of 2019, steel price increased sharply on the
market
91
Part III. Vietnam market
4. Construction steel
Source: VIRAC, VCBS
Rebar price movements 2019
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Steel pipe
Regarding market share, in 2019, Hoa Phat maintained their leading
position in the steel pipe production market (accounting for X%);
80
Part III. Vietnam market
5. Steel pipe
Steel pipe production and consumption 2013 – 2019
Source: VIRAC, VSA
Source: VIRAC, VSA
Steel pipe market share 2019
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Content is deleted for demo purposeSource: VIRAC, VSA
In 2019, galvanized steel consumption
reached X thousand tons, decreasing by 22% compared to the same
period. Reasons:
79
Part III. Vietnam market
6. Galvanized steel
Source: VIRAC, VSA
Galvanized steel production and consumption, 2013 – 2019
Galvanized steel market share 2018 - 2019
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Source: VIRAC, GDVC
In 2019, iron and steel imports reached X million tons,
• China is still the largest steel supplier for Vietnam.
Source: VIRAC, GDVC
82
Part III. Vietnam market
7. Import - export
Steel imports, 2013 – 2019
Steel imports by market, 2019
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China is still the largest steel supplier for Vietnam. The import volume from this market in 2019 accounted for X% of Vietnam’s total steel import value.
Source: VIRAC, GDVC
83
Part III. Vietnam market
7. Import - export
Chinese steel import volume and value,, 6/2016 – 12/2019
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Source: VIRAC, GDVC
• In 2019, Vietnamese steel exported to foreign markets increased by
X% in volume, decreased by X% in value and X% in price compared
to 2018.
Source: VIRAC, GDVC
84
Iron and steel export volume and value, 2013 – 2019
Part III. Vietnam market
7. Import - export
Vietnam’s steel export markets, 2019
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• The Prime Minister issued Decision No. 145/2007/QD-TTg on 04/09/2007
No. Content Planned location Start – complete time
Investment
capital
(million
USD)
Product (1000 tons)
Cast iron Billet Rolled steel
103
Part VI. Planning and forecasts
1. Planning
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ENTERPRISE ANALYSIS
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Enterprise Logo Total
assets
Revenue General information
123
Part V. Enterprise analysis
1. Enterprise introduction
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Enterprise Logo Total
assets
Revenue General information
124
Part V. Enterprise analysis
1. Enterprise introduction
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Enterprise Logo Total
assets
Revenue General information
125
Part V. Enterprise analysis
1. Enterprise introduction
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Enterprise Logo Total
assets
Revenue General information
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1. Enterprise introduction
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2. Financial analysis
Net revenue and growth rate, 2017 - 2018
Source: VIRAC, Enterprises' financial statements
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
10,000
20,000
30,000
40,000
50,000
60,000
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Part V. Enterprise analysis
2. Financial analysis
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In 2018, steel enterprises had declining marginal gross profit compared to the previous year. This was due to volatile price movement of input raw
materials.
Source: VIRAC, Enterprises' financial statements
130
Part V. Enterprise analysis
2. Financial analysis
Gross profit and gross profit rate, 2017-2018
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
(2,000)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
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Part V. Enterprise analysis
2. Financial analysis
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Part V. Enterprise analysis
2. Financial analysis
Selling expenses/net revenue, 2017-2018
Source: VIRAC, Enterprises' financial statements
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Part V. Enterprise analysis
2. Financial analysis
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Part V. Enterprise analysis
2. Financial analysis
G&A expenses/net revenue, 2017-2018
• Like the ratio of selling expenses / net revenue, the ratio of enterprise management expenses of steel enterprises is also differentiated, in the range of
X-X%.
Source: VIRAC, Enterprises' financial statements
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
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Part V. Enterprise analysis
2. Financial analysis
Financial expenses/ net revenue, 2017 -2018
• Many enterprises had higher financial expenses/net revenue rate in 2018 compared to 2017.
Source: VIRAC, Enterprises' financial statements
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
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• Due to characteristic production, steel producing enterprises with different products and technology will have different asset structure.
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Part V. Enterprise analysis
2. Financial analysis
Asset structure, 2018
Source: VIRAC, Enterprises' financial statements
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
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• The level of using financial leverage of enterprises in the industry is quite diversified depending on the risk appetite of each enterprise.
137
Part V. Enterprise analysis
2. Financial analysis
Debt structure, 2018
Source: VIRAC, Enterprises' financial statements
0.00
1.00
2.00
3.00
4.00
5.00
6.00
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
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Part V. Enterprise analysis
2. Financial analysis
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Average inventory turnover of steel enterprises is about x-x round per year.
139
Part V. Enterprise analysis
2. Financial analysis
Inventory turnover, 2018
Source: VIRAC, Enterprises' financial statements
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
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Long steel (Construction steel) enterprises often have higher number of receivable days.
140
Part V. Enterprise analysis
2. Financial analysis
Receivable days, 2017 - 2018
Source: VIRAC, Enterprises' financial statements
0
10
20
30
40
50
60
70
80
90
100
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Steel enterprises with relatively fast liquidity ratios, current industry average index only reached X and there is a large gap between these two indexes.
141
Part V. Enterprise analysis
2. Financial analysis
Enterprises’ liquidity, 2018
Source: VIRAC, Enterprises' financial statements
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
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Part V. Enterprise analysis
2. Financial analysis
Source: VIRAC, Enterprises' financial statements
Probability ratio/asset and equity, 2018
Profit after tax, 2017 - 2018
Source: VIRAC, Enterprises' financial statements
Profit after tax of steel enterprises fell sharply compared to the previous year
except
-10%
-5%
0%
5%
10%
15%
20%
(1,000)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
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64
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