Domestic steel prices expected to rebound

In the first seven months of 2025, domestic steel consumption rose 16% year-on-year, supported by a recovery in real estate supply and stronger public investment disbursement.

Construction steel and hot-rolled coil (HRC) consumption increased 14% and 26% year-on-year, respectively, partly thanks to gains in market share from Chinese imports.

MBS noted that a slowdown in Chinese steel exports has been a key driver of the domestic recovery. Since July, construction steel and HRC prices have rebounded 3% and 4% month-on-month, reaching $560 per ton and $530 per ton, respectively.

As peak demand may fall in the second half of the year, construction steel prices are projected to climb to $594-635 a ton ( up 6-7% year-on-year) and HRC to $575-605 a ton (up 3-4%) in 2025-2026, the broker noted.

Lower raw material costs to support margin

The MBS analysts forecast coal and iron ore prices could ease due to oversupply from Australia and Brazil, where favorable weather has allowed higher output.

Coal supply is expected to grow 1.5-2% year-on-year, while iron ore could rise 2-3%. Meanwhile, China’s steel production cuts should reduce raw material demand.

Against this backdrop, leading producers such as Hoa Phat (HoSE: HPG) are expected to see gross margins expand by 1.1 percentage points in 2025 and 0.2 in 2026.

Coated steelmakers, including Hoa Sen (HoSE: HSG), Nam Kim (HoSE: NKG), and Ton Dong A Corporation (UPCoM: GDA), will also benefit from recovering HRC prices and cheaper inventories, with margins improving by 0.7-1 percentage point. Overall, sector-wide gross margins are projected to rise by one percentage point in 2025 and 0.5 in 2026, the experts predicted.

The broker highlighted that the sector’s price-to-book (P/B) ratios are highly correlated with steel price cycles. In 2020-2021, when construction steel and HRC prices surged 120% and 118%, steelmakers’ P/B ratios rose from 0.4-1 to 1.1-3.2.

“The 2025-2026 period marks the bottoming out of steel prices and the beginning of a new upcycle, supported by robust domestic demand,” MBS analysts said.

Accordingly, they expect sector valuations to re-rate to 1.4-2.8 times book, about 30% above current levels. Stocks such as HPG, HSG, and VGS are rated positively.