Steel prices and output rebound

In its Q3 business update for the steel sector, MBS noted that recovering domestic steel prices and output are the two main factors driving improved Q3 results.

Hot rolled coil products. Photo courtesy of Vietnam Television.

Specifically, total domestic output in Q3 is projected to rise by 21% year-on-year, reaching 6.3 million tons, with the main contributions coming from construction steel and HRC (hot rolled coil), which together account for 65% of total volume.

"In the context of a forecasted recovery of over 30% in real estate supply in Hanoi and Ho Chi Minh City, coupled with strong public investment disbursement (estimated to grow by 18% in 2025), consumption of construction steel is expected to increase by 10% year-on-year in Q3," said Le Hai Thanh, an MBS analyst.

In addition, with Phase 2 of Hoa Phat’s Dung Quat 2 steel plant in the central province of Quang Ngai entering operation in Q3 and domestic players increasing their market share to over 60%, HRC consumption is expected to grow 48% year-on-year, reaching 1.7 million tons.

MBS also expected domestic HRC producers like Hoa Phat and Formosa to improve their market share as wide-format HRC imports from China may be subjected to tighter controls.

On the other hand, export volume is likely to remain subdued due to weak demand in key markets such as the EU and the U.S., leading to a projected 10% decline in year-on-year export volume.

Steel prices saw a modest recovery in Q3, while input costs for coal and iron ore remained low, positively impacting gross profit margins across the sector.

"In Q3, HRC prices rose 2% and construction steel prices rose 3% quarter-on-quarter, while remaining flat year-on-year. We believe this upward pricing trend reflects strong domestic demand and improved competitiveness against Chinese steel, supported by anti-dumping measures," MBS noted.

The broker also forecast domestic steel prices will continue to rise in Q4, supported by peak seasonal demand, ongoing public investment, and increased real estate project launches.

During Q3, steel producers continued to benefit from low raw material prices, thanks to inventory from Q2. Coal and iron ore prices are expected to fall by 6% and 5% year-on-year, respectively, amid weak industrial demand in China, leading to excess supply.

As a result of stable steel prices and lower input costs, gross margins rebounded significantly, becoming a key bright spot for the steel industry in Q3.

Strong profit growth forecast

MBS analysts noted that the Q3 gross margin Hoa Phat, listed on the Ho Chi Minh Stock Exchange (HoSE) as HPG, improved by 4 percentage points year-on-year, driven by flat steel prices and declining coal and iron ore costs.

For coated steel producers like Hoa Sen Group (HSG), low-priced HRC inventory and a recovery in coated steel prices boosted gross margin by 4.7 percentage points year-on-year.

Exporters such as Nam Kim (NKG) and Ton Dong A (GDA) saw slight improvements in gross margins of 0.1 and 0.2 percentage points, respectively.

The broker forecast Hoa Sen to report VND260 billion ($9.85 million) in profit for Q3, representing a 244% increase year-on-year. For the full fiscal year 2025, HSG is expected to achieve VND906 billion ($34.3 million) in net profit, up 86%, driven by improved gross margins from recovering steel prices (starting August 2025), stable HRC input prices, and a 7% growth in sales volume, primarily from the domestic market.

Meanwhile, Hoa Phat is projected to post VND4,700 billion ($177.96 million) in Q3 net profit, up 56% year-on-year, boosted by a 60% year-on-year increase in HRC output due to favorable demand and the new capacity from Dung Quat 2 - Phase 2. Nine-month profit is expected to rise 34% year-on-year, fulfilling 82% of the annual target.

Profits at Ton Dong A and Nam Kim are expected to grow by 42% and 38% year-on-year, reaching VND75 billion ($2.84 million) and VND90 billion, respectively.

According to MBS, the profit growth of these companies is mainly attributed to slightly higher gross margins and lower selling expenses.