PART 2: VIETNAMESE CONSTRUCTION STEEL SECTOR IN 2014

Firstly, look at the sales of  the firms belong to Vietnamese Steel Association (VSA's members) in first 11 months of 2014 was 4.7 million MT[1], estimated for whole 2014 is 5.2 million MT, plus with imported steel, total consumption estimated 5.8 million MT for whole year, increasing 1.3% compared with last year.

Demand for construction steel is not much in 2015, according to calculation by author, anticipated consumption of construction steel of Vietnam in 2015 will be 6 million MT while VSA forecast is 5.97 million MT[2].

Figure 1: Total apparent consumption of construction steel (long products) in 2012, 2013 and provision for 2014 (Unit: MT)

Source: Data of 2012 and 2013 are from VSA[3]; *calculated by author

Notes: Long products include bars, wire rods, sections, wire.

Take a look at the market share of the top 5 players are leading the construction steel market of Vietnam.

Figure 2: Market share of construction steel industry (long products) of Vietnam in 2013 and 2014

Source: Newsletters in Nov 2013 and Dec 2014 (VSA)

Hoa Phat is applying the vertical integration strategies including backward and forward integration, owning an integrated production chain from extraction and processing of iron ore to manufacturing steel products. They are performing value chain activities more efficiently than rivals, take advantage of low production cost though cheap raw materials by exploiting iron ore to produce steel, to apply competitive strategy: Cost leadership strategy in order to gain the market share and finding the profit in the saturated steel market in Vietnam.

In 2014, Hoa Phat has achieved sales volume of 1 million tons of construction steel, exceeding 11% of the year plan and up 43% compared with 2013. Leads in the construction steel market with 19% market share[4]. It makes a sales plan of 1.2 million tons for the year 2015.

In second place in the standings is Pomina, the company has lost throne of industry leader in hand Hoa Phat in 2014. Sales of the first 11 months of 2014 was 721 thousand tons, is expected to be 786 thousand tons yearly, an increase around 8% compared with last year. This plant is running only 60% capacity[5], high depreciation, high cost of capital and high cost of input material of the EAF iron making technology, has made this company consecutive losses two years recently.

Dinh Long

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[1] Newsletters in Dec 2014 (VSA)

[2] http://www.tienphong.vn/Kinh-Te/nam-2015-nganh-thep-chiu-nhieu-suc-ep-804763.tpo

[3] Country report- SEAISI- 2014 Conference & Exhibition- (Chu Duc Khai- Vice President & General Secretary of VSA)

[4] http://cafef.vn/doanh-nghiep/thep-hoa-phat-can-dich-1-trieu-tan-len-ke-hoach-12-trieu-tan-nam-2015-201412291129409873ca36.chn.

[5] http://www.vnsteel.vn/noi-dung/tin-tong-hop/pomina-bao-gio-het-lo/default.aspx