Thứ Sáu, 14 tháng 7, 2017

Impressive growth of the galvanized steel sheets industry in Vietnam

Picture 1: Galvanizing production at Ton Dong A Corporation
            Vietnam steel industry had an impressive business year in 2016, according to Vietnam Steel Association (VSA), in 2016 the total steel products that VSA member companies produced was 17.5 million tons, up 16.8% over 2015. Consumption reached 15.3 million tons, up 23.7% compared to 2015. In that context, the galvanized steel sheets industry has grown very well, production reached 3.37 million tons, consumption was 2.93 million tons, it was a growth of 25% compared with 2015.
 The galvanized steel sheets industry in Vietnam, temporarily defined in this article, includes coils with over 600 mm width, produced by the continuous galvanizing lines using non-oxidizing furnace technology (NOF). The coating material can be zinc (99.5% Zn) called GI coils or aluminum zinc alloy (55% aluminum + 43.5% zinc + 1.5% silicon) which called GL coils. The galvanized steel sheets industry described in this article also includes the color coated steel sheets & coils (PPGI / PPGL/ PCM).
The level of industry centralization
Vietnam's galvanized steel sheets industry is now considered to be highly centralized, with top 5 leading companies accounting for 77% of total industry output in 2016.
Table 1: Top five leading companies in 2016
Ranking
Companies
Sales in 2016, thousand tons
Products
1
Hoa Sen Group
1242
GI, GL, PPGI, PPGL and GI pipes
2
Nam Kim Group
540
GI, GL, PPGI, PPGL and GI pipes
3
Ton Dong A Corp.
365
GI, GL, PPGI, PPGL
4
Ton Phuong Nam
230
GI, GL, PPGI, PPGL
5
Maruichi Sun Steel
230
GI, GL, PPGI, PPGL and welded steel pipes
The sales of Maruichi Sun Steel was only estimated by author
Source: Annual Reports and VSA
The sales of Hoa Sen and Nam Kim, although were high, however, it included the production of galvanized welded steel pipes, which accounted for a significant volume due to the higher thickness compared with galvanized steel sheets. Welded galvanized steel pipes in Vietnam normally have thickness around 1.2 and 2.0 mm, while galvanized steel sheets in Vietnam have an average thickness of only around 0.3-0.6 mm
The investment overview of the sector
There are currently 11 large galvanizing companies and 5 smaller companies in Vietnam with a design capacity of 4.63 million tons per year, in which mainly about 20 continuous galvanizing lines (CGL) adopted N.O.F. technology, only about two lines used the old technology dry-flux. The 5 small companies are adopting the old technological galvanizing lines which called wet-flux or dry-flux technology, the capacity of these companies is not yet determined.
Those new entrants with high capacity are Hoa Phat, Pomina, My Viet Olympic and Vinaone are expected to make the market more exciting. Leading companies such as Ton Dong A, Nam Kim and Hoa Sen continue to make large investments to scale up, and smaller companies are also developing their investment plans. According to my statistics, by the year 2018, there is about 11 galvanizing lines will be installed, bringing the total coating capacity up to 46%, from the current 4.39 million tons to 6.4 million tons per year or more!
Table 2: Installed capacity and production in recent years
Years
2015
2016
2017E
2018F
Installed capacity, million metric tons
3.39
4.18
4.39
6.40
Production, million metric tons
3.15
3.37
3.63
3.92
Capacity growth rate
23%
5%
46%
Mining factor
93%
81%
63%
61%
Source: Author calculates based on market information and cross-checked with corporates investment announcements
The growth of capacity is almost two-year cycle, due to the time needed to manufacture and installing a continuous galvanizing line is around 16-20 months. Galvanizing manufacturers in Vietnam have a habit of observing market demand and looking at the movement of each other to invest, therefore, the capacity is normally increases with the same cycle. Table 2 shows mining factor is decreasing, it may show that the supply is higher than the demand
The capacity galvanizing steel coils will be 6.4 million tons per year for a country of 100 million people is a hard-to-imagine figure. Compared to India: With a population of 1.36 billion people and a country with a longer steel industry than Vietnam, there are many large steel companies ranking in the world, such as JSW or Tata, with total steel output in 2016 was 95.6 million tonnes, ranking third in the world, however, its total galvanized steel sheets production in 2016 was 6.4 million tonnes only!
However, the investment speed in expanding production in the galvanizing industry seems not slowdown at all, many people have asked author whom will consume that such large production. Of course, the galvanizing makers do not invest without calculation, they can see the current demand as well as forecast the potential demand through daily business. I hope can make clear this question mark in the forthcoming SWOT analysis of Vietnam's galvanized steel industry
Development strategies of Vietnam's galvanized steel industry
Development strategies are currently in widespread used:
-        Horizontal development: Invest in increasing the scale of production. Steel enterprises in Vietnam at the moment do not have M&A practice, thus, increasing financial leverage to invest or going to public to raise capital as common options
-        Vertical development: Large galvanized steel sheet manufacturers such as Ton Dong A, Nam Kim and Hoa Sen have always tended to have investments of integrating the supply chain, which are indispensable conditions for controlling raw materials and reducing production costs in order to increase profit margins. One typical example that is the movement of increasing the cold rolling capacity: Currently, the cold rolling capacity is more than 5 million tonnes produced by 15 reversing cold rolling mills, almost the mills are single-stand mills (CRM), including two double stands reversing cold rolling mills. Estimating there are three more double stands mills will be operated in 2017-2018. The cold rolling capacity will be increased 3.6 million tonnes more in 2017-2018, thus the rolling capacity of Vietnam will be 8.6 million tonnes per year in 2018. There are some signals indicated that the large GI makers are considering to invest the tandem cold mills (TCM).
-        Product diversification: One example that is the galvanized steel sheet manufacturers join increasingly more in the steel pipe market. The other movement is the improvement of product quality to penetrate the high quality products markets such as home appliances and the car industry. This strategy requires a long-term effort, requiring management, technology and capital capability
-        Of course, the steel makers of Vietnam always try to restructure the organization system and re-designing the management system towards modern structures, building and developing human resources in accordance with world standards.

Part 2: SWOT Analysis of Vietnam’s galvanized steel industry

     Phan Dinh Long

2 nhận xét: