The sluggish housing market continued to throw a pall on the prospects for steel makers' recovery in 2H23.

The residential real estate sector, which makes up between 60 and 65 percent of Vietnam's overall steel consumption, has a significant impact on the country's steel demand. Due to certain tycoon arrests for violating corporate bond issue regulations, a lack of available credit for real estate, as well as rising loan rates, the demand for housing has decreased in Vietnam's residential property market since 2Q22.

Recently, the real estate sector has seen some encouraging signs. Since the beginning of 2023, a number of policies have been released to address the real estate market's challenges, including Decree 08/2023 on corporate bonds, Resolution 33 on some solutions to address the real estate market's challenges, Decision 388, and Decree 10, which will aid in removing legal obstacles.

However, VNDirect thinks it would still be premature to declare that the real estate market would revive in the near future because it is uncertain how effective the execution of laws will actually be and there are still a lot of bottlenecks that need to be cleared out. The aforementioned regulations can alleviate the bottleneck to some extent, but for the real estate market to recover, more synchronous solutions are required with regard to both legal procedures and capital availability.

"We anticipate that the domestic property supply will only be able to revive from 2024F when (1) the amended Land Law is approved to eliminate legal obstacles and (2) banks lower lending rates and create more convenient access to capital to encourage developers and increase demand from homebuyers. Vietnam's steel demand won't fully recover as a result until 2024F”, said VNDirect.

In 2023, the demand for construction materials will be significantly impacted by the domestic civil construction industry's persistently weak demand. Even if public investment spending is anticipated to pick up speed in the ensuing quarters, VNDirect anticipates a single-digit fall in overall domestic steel consumption in 2023F. In which it projects a 9%–7% year-over-year decline in the amount of construction steel and galvanized steel sales in Vietnam in 2023F.

The majority of the managements of listed steel companies have a more optimistic prognosis for the sector at the 2023 Annual General Meeting (AGM), noting that 2H22 was the industry's toughest period, but that things have started to turn around since 1Q23F. In contrast to 2H22's two straight quarters of losses, all corporations have provided favorable business guidance for FY23F. Although the demand for steel will continue to be low in 2023, it will be extremely difficult for steel businesses to implement their full-year business strategy.