Steel industry - Few Recovery Opportunities in 2023
- Increasing difficulties in export markets, domestic demand will play a leading role in revenue growth in 2023. Construction steel and steel pipes, which have a higher proportion of domestic consumption, may grow faster than GDP, while coated steel will recover slowly from mid-2023 due to monetary policy tightening globally. Accordingly, we expect the prospect of recovery more positively in construction steel companies, including HPG, Formosa, Pomina ...
- Gross profit margin will recover slowly due to weak consumption. Prices of coking coal, iron ore and scrap will fluctuate in the narrow amplitude around the end-2022 level due to the low demand for raw materials of upstream mills globally. Selling prices will rise gradually from Q3 in both domestic and export markets.
- VND depreciation and interest rate hiking are going to pressure financial expenses. VND will still depreciate vs. USD and borrowing interest rate will increase at least until mid-2023, following the Fed's rate hikes, creating a burden on financial expenses for businesses that have struggled with gloomy business prospects. Businesses are and will limit the impact of the issues of exchange rate and interest rate increase via tightening borrowing needs and managing working capital more closely.
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