Steel stocks raced to gain points, glorious minutes and then suddenly turned off or started a new “wave”?

The flourishing performance of the steel industry concurs with the news that the profit in the first quarter of 2023 has improved significantly compared to the previous two quarters, plus a push to disburse public investment.

The stock market had an explosive session at the end of the week when the strong demand at the end of the session pushed VN-Index to close the highest point of the day. Today’s rally has a strong impression of steel stocks. HPG increased by 2.8%, increased by 22,350 VND/share, the trading volume exceeded 45 million units – the highest in the whole floor. This is also the highest market price within 6 months of this leading code.

Similarly, HSG, NKG, TLH, and POM all covered in green with a steady increase of over 1%, even SMC hit the ceiling by 6.7% to 12,000 dong/share.

Looking more broadly from the bottom of November 2022 to now, most stocks have grown strongly in price, HPG increased by 85%, HSG even increased by 122%, NKG increased by 108%, SMC increased by 70%,…

The flourishing performance of the steel industry concurs with the news that the profit in the first quarter of 2023 has improved significantly compared to the previous two quarters. The total profit of steel enterprises on the stock exchange is estimated at about 500 billion dong, although it is still quite modest, it has prospered much better than the negative level of 4,700 billion in the fourth quarter of 2022. Most notably, Hoa Phat (HPG) was profitable again despite many previous reports of securities companies that still forecast that the steel industry might continue to suffer losses.

Confidence is also reflected in the business plans of enterprises, revenue and profit targets are mostly positive compared to the implementation in 2022. Most of the management board in the recent AGM season. The most difficult things for the steel industry happened in the second half of last year, the situation has improved in the first 3 months of 2023 and will almost certainly be profitable in the second quarter.

On the other hand, the story of public investment also raises many expectations for the steel industry group when this is an indispensable building material in construction activities. In April, the disbursement progress of public investment capital had many changes. According to information from the Ministry of Planning and Investment, it is estimated that by April 30, 2023, the whole country has disbursed 110,633.6 billion VND, reaching 15.65% of the plan assigned by the Prime Minister, in terms of number absolute increase to nearly 15 trillion dong (about 16%) over the same period last year. The good news blew the fire, helping beneficial stocks including the steel industry to attract investors’ cash flow.

However, it should be noted that the steel group currently only records Hoa Phat trading and has a large market share in the construction steel segment – the main raw material in construction, while the remaining businesses mainly operate in the galvanized steel sheet segment. The dose of “dopping” in the name of public investment will therefore not be able to spread to all steel enterprises as expected.

Even with Hoa Phat, many experts also believe that the public investment push will not be as expected. Vietcombank Securities (VCBS) in an updated report said that the proportion of steel consumption in public investment is insignificant, only 10%-15% and currently the disbursement rate of public investment is quite slow, so Expectations for consumption growth will be negative this year.

Not stopping yet, the steel industry business outlook in the remaining months of 2023 is said to be not entirely easy in the context of negative demand that continues to put pressure on steel prices and consumption volume. According to VCBS, China’s real estate market problems have not been resolved, construction demand is still very weak, and this will negatively affect steel prices in 2023. This is reflected in the RMI Index maintaining a high level. very low. Demand in markets such as the EU and the US is also less positive when interest rates remain high.

Along with that, the demand for steel products in Vietnam will continue to weaken in the coming quarters and it will take time to recover when the residential real estate market has not recorded many real changes.

In fact, steel prices showed signs of reversal and began to decline sharply from the beginning of April until now. The price of rebar in China has fallen to the lowest level since mid-November 2022; the price of some domestic steel has also decreased by about 1 million dong/ton in the past month.

Similarly, VNDirect Securities pointed out that actual steel demand in China is not as strong as expected. Weak demand will cause profit margins for companies in the industry to fluctuate, especially small companies with more limited inventory management skills.

In particular, the prospect of the civil real estate industry has the greatest influence on the demand for Vietnam’s steel industry when accounting for about 60-65% of the whole industry’s demand. However, VNDirect said that it is still too early to assess whether the real estate market will soon “defrost” when the actual effectiveness of policy implementation is still open and many bottlenecks have not been thoroughly resolved. The prolonged dismal demand of the domestic civil construction sector will have a significant impact on the demand for construction materials in 2023 and it will not be until 2024 that the domestic real estate supply can be restored. Therefore, although public investment disbursement is expected to accelerate in the coming quarters, VNDirect forecasts that total domestic steel demand will grow in negative single digits in 2023.

Phuong Linh/Market Lifestyle