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Steel sector Nov 2021: Prices of iron ore, HRC and construction steel cooled down

World prices of iron ore, HRC and construction steel cooled down. Domestic steel prices adjusted down. Domestic consumption in the month decreased compared to Oct.

Price movements

Iron ore price has stopped the decline in Nov. 2021; and slightly increased from the beginning of Dec. The reason why iron ore prices inched up in the first 2 weeks of December was (i) China's iron ore import demand in Nov. increased again (+14.6% MoM, and was the strongest import month since July 2020); (ii) steel mills' demand for ore storage (stock of raw materials) increases when prices are low.

However, as of December 16, 2021, iron ore prices are still ~$109/ton (~50%) lower than the peak recorded in mid-July-2021.

Prices of HRC & Construction Steel in China & USA have opposite movements since mid-November until now. While the price of HRC & construction steel in China inched up, in the US the price of steel decreased. (Please see more reasons for price action on Page 4 of this report)

Domestic steel price: At the beginning of December 2021, domestic steel enterprises continued to reduce their selling prices. The current price has decreased by ~11% compared to mid-May-2021, but is still 11.5% higher than at the end of 2020.

Domestic steel price forecast

The domestic steel price may continue to move sideways / decrease slightly for at least the next 3 months, in the context that the price of many steel materials cools down and domestic demand slows down (due to the pandemic situation). complicated developments in many provinces and cities and the Lunar New Year is coming.)

In addition, the steel price of domestic enterprises may be under competitive pressure with imported steel, when Decree No. 101/2021/ND-CP takes effect from December 30, 2021.

Specifically, in an effort to control inflation in the face of increasing price pressure of many commodities, on November 15, 2021, the Government issued Decree No. 101/2021/ND-CP amending and supplementing a number of articles of Decree No. 122/2016/ND-CP and Decree No. 57/2020/ND-CP on export tariff, preferential import tariff, List of goods and absolute tax rates, mixed tax, tax imports outside the tariff quota. Accordingly, the MFN import tax of some construction steel products and steel plates will be reduced by about 5%-10%. This may create more competitive pressure for domestic steel products.

Manufacturing & Consumption

In 11-2021, the country's total steel production output still increased by 7% YoY and 3.3% MoM, but steel consumption slowed down after a strong recovery in the previous month. The reason for the slowdown in domestic consumption is that even though large projects/works have restarted, there are still many obstacles and difficulties, making progress slower than previously expected.

Specifically, the consumption volume of VSA members in Nov. alone decreased by -8.6% YoY and decreased by -13.9% MoM. In which, domestic consumption in Nov. decreased by -11% MoM and export decreased by -20% MoM. In which, the decrease was mainly due to construction steel (-26.1% MoM), galvanized sheet (-8.7% MoM) & steel pipe (24.5% MoM).

However, this decline is considered to be temporary, and the prospect of steel consumption (both for export and domestic) in 2022 is still forecasted to be positive thanks to investment promotion undertakings/policies. public works of governments (including Vietnam).

Source: Vietdata's December 2021 Steel Industry Report


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