Orders for HRC product exceed 200% of Hoa Phat’s production capacity

Currently, the number of orders for Hoa Phat’s hot rolled coil (HRC) products reached more than 180,000 tonnes till January 2021. Meanwhile, Hoa Phat Group could only supply 90,000 tonnes as it has to reserve a part for internal use. This means that the market demand has exceeded 200 per cent of the group’s production capacity. 

Orders for HRC products exceed 200 per cent of Hoa Phat Group’s production capacity

The demand for HRC products both inside and outside the country has been on the rise, especially in China, causing pressure to the HRC supply worldwide. In China, the policy to reduce HRC output in the winter was officially taken effects despite of rising demand in the country. The depreciation of the US dollar against the Chinese yuan has also prompted factories to focus on selling domestically. This causes a HRC shortage in the world.

According to Vietnam Steel Association (VSA), the HRC selling prices in the domestic market has been increased by US$15-20 per tonne from the beginning of October and currently fluctuating around US$550-570 per tonne. Despite of the increasing prices, the demand for HRC products has been still high.

In reality, the inventories at factories using hot rolled coil steel have been at low level. Meanwhile, the demand for construction materials such as galvanised steel, steel pipe and structural steel would be higher in the year-end months as the rainy season ends and increasing consumption in the upcoming Tết (Lunar New Year).

On the other hand, Vietnam has joined in many free trade agreements (FTAs), thus opening export opportunities for galvanized steel, cold rolled steel, and steel pipe businesses in Vietnam. However, the export orders to the US and EU markets need to prove the origin of the base steel (HRC) produced in Vietnam. It is the reason that domestic factories have increased their HRC orders from Hoa Phat Group.

VSA’s statistics showed that the HRC demand in Vietnam is estimated at some 8 million tonnes a year (including 5 million tonnes from Formosa Ha Tinh and more than 3 million tonnes from Hoa Phat Group). Currently, HRC production meets only 60 per cent of the total local demand.

It is the reason that Hoa Phat Group has been active in completing legal procedures to expand its Dung Quat project with a focus on HRC products, thus maintaining its revenue and profit growth rates in the long-term period.

Nghi Tran