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
Detail and very useful. May I share it? Thank you anh.
Trả lờiXóaThanks Tuan.
XóaYes. Sure you can, I am pleased