Steel demand decreases in Vietnam

Vietnam's steel industry is facing difficult times as tough real estate regulations suppress demand for new buildings, Nikkei Asia reported.

Hoa Phat Group, the largest steel producer in Southeast Asia, has suspended the operation of four blast furnaces mines in Vietnam in the fall of 2022. Other Vietnamese steel producers who use electric furnaces have also had to drastically reduce production.

”We have the impression that things have finally hit rock bottom, but they are still in bad shape," said one industry executive. “It is unlikely that we will see a recovery until at least mid-2023., ” he added.

The productivity of enterprises using electric furnaces in South Vietnam began to decline around September 2022. It is believed that many of these factories are operating at less than 50% of their capacity, and some of them are turning to lay off employees.

According to local media reports, the total sales of Vietnam's three largest steelmakers (Hoa Phat, Hoa Sen Group and Nam Kim Group) decreased by 25% in July-September compared to last year, as both production and steel prices decreased.

Since November, Hoa Phat has suspended the production of molten iron from two of the four operating furnaces at the flagship Dung Quat steel plant in central Quang Ngai province. The company also suspended production from one of its blast furnaces in the northern province of Hui Duong.

As a result, three of the manufacturer's seven blast furnaces mines are not producing steel at the moment. The blast furnaces are designed to operate at full capacity around the clock. Suspending operations can damage them, and it often takes time for a non-working oven to resume operation.

Despite the huge cost of stopping the operation, Hoa Phat decided to "stop the bleeding," according to a company spokesman.

As a result, the company's crude steel production in November decreased by 43% y-o-y to about 380,000 tons. In the first 11 months of last year, production decreased by 6% y-o-y to about 7 million tons, mainly due to the sharp decline in production over the past few months.