Steel prices are expected to maintain a positive momentum after their recovery in mid-2020, and rise in the coming months as global demand recovers and major producers worldwide experience supply disruptions due to the Covid-19 pandemic, brokerage SSI Securities Corporation says in its latest report.

The price of construction steel had hit a three-year trough in April last year, at slightly VND10 million ($434.77) per ton, but rose sharply in the second quarter to end at around VND14 million by the end of the year, according to data from the Vietnam Steel Association.

"Domestic construction steel prices increased 25 percent year-on-year and 36 percent from its April nadir, while the price of hot rolled coil (HRC) was up 43 percent year-on-year and 80 percent over its last through," the report said.

Steel prices began surging in the second half of 2020 on the back of strong domestic demand driven by the government stepping up disbursement for public construction projects, and domestic traders stocking up on inventory when prices began to rise.

Exports also benefited from production disruptions in major global steel producers such as the EU, U.S., India, Japan and South Korea, which saw their 11-month 2020 production fall 15 percent, 18 percent, 12 percent, 17 percent and 7 percent year-on-year, respectively, according to the World Steel Association.

Vietnam and China were two of the few countries that saw steel production growth in the first 11 months of last year, with increases of 28.8 percent and 5.5 percent respectively. China, in particular, had been pushing investment in public infrastructure to maintain its GDP growth as its private sector slows down.

With domestic demand set to climb 8 percent this year, fueled by infrastructure investment, FDI inflows and speculative hoarding, steel prices will likely hit their peak sometime during the year before turning the other way as exports face more competition from major global steel makers catching up in supply, SSI said.

"This will take surging domestic steelmaker’s profit margins back to normal levels," the report said.

According to the World Steel Association, demand is expected to increase 4.1 percent in 2021 after falling 2.4 percent last year. Demand in emerging markets, excluding China, is expected to increase 9.4 percent.

As a result, SSI expects Vietnam's steel exports to be able to achieve single-digit growth this year, taking into account rising competition from global producers.

On the stock market, at the end of 2020, the total market cap of stocks in the steel industry had risen 111 percent year-on-year, and 188 percent from its March bottom, much higher than the benchmark VN-Index.

The price-earnings (P/E) ration valuations of steel firms have recovered to pre-Covid levels, the report said