Great victory after 2 years of epidemic, steel enterprises return to the investment race to expand

Steel projects tens of trillions of dong

During the two years of the Covid-19 outbreak, many fields and business lines were affected. Particularly for the steel industry, this is an opportunity to make a breakthrough. Many businesses have taken advantage of this favorable time to accumulate profits and improve financial health.

Enjoying the investment results from previous years with a favorable industry context, Hoa Phat (HoSE: HPG) recorded a total profit of 48,000 billion VND in the past 2 years, equal to the 10 years before combined. Nam Kim (HoSE: NKG) achieved more than VND 2,500 billion in profit in the period of 2020-2021, far exceeding the total figure of the previous decade. Other large enterprises such as Hoa Sen (HoSE: HSG), SMC Steel (HoSE: SMC) also achieved similar results.

Those achievements are the foundation for steel enterprises to move towards further development milestones despite the post-pandemic situation of the industry slowing down and being expected to face many difficulties.

After the success of Dung Quat 1, Hoa Phat Group plans to continue investing in Dung Quat 2 factory with a capacity of 5.6 million tons of HRC (upstream steel products – hot rolled coil), increasing the total output of the system. about 14-15 million tons of steel products. Total investment for the project is about 80,000 billion VND. According to Mr. Tran Dinh Long, Chairman of the Board of Directors, in May the group signed all major contracts for the project.

Not stopping there, the Chairman also revealed his ambition to invest in Dung Quat 3 steel factory with a capacity of 6 million tons/year, partly producing HRC and the rest U steel, Y steel. The project will deploy. after 2025. Thus, Hoa Phat’s total capacity will probably reach 21 million tons, equivalent to Vietnam’s current steel consumption demand.

Hoa Phat wants to increase its capacity to 21 million tons of products per year, equivalent to the current national demand for steel.

At the beginning of April, Nam Kim Steel revealed its investment plan for the project of Ton Nam Kim Phu My Ton Factory with a scale of 1.2 million tons/year, with a total investment of VND 4,500 billion. Unlike Hoa Phat, which focuses on upstream products, Nam Kim accelerates for downstream products such as cold rolled steel, coil, galvanized steel, aluminum zinc alloy coated steel (cold sheet)…

Nam Kim currently has 3 factories with a total designed capacity of 1 million tons/year, specializing in the production of cold corrugated iron, color cold corrugated iron, zinc corrugated iron, and steel pipes. If a new factory is completed, the capacity of the whole system will increase 2.2 times to 2.2 million tons/year.

If in 2021, Nam Kim just optimized the internal platform to increase capacity or Hoa Phat is preparing investment procedures, then SMC Steel has accelerated investment and is expected to initially reap this year. Enterprises make new investment in 9.7 ha SMC Phu My project cluster in Phu My 2 industrial park, Ba Ria – Vung Tau with a total investment of more than 1,000 billion VND. The project includes 1 joint venture between SMC and Samsung C&T and 2 subsidiaries owned by SMC with 100% capital, forming the largest steel processing center – coil center in the country with a total design capacity of 300,000 tons of steel and 10 million VND. product/year. The project has been basically completed, fully invested in phase 1 and put into operation.

SMC Phu My Precision Mechanic Factory – a specialist in punching and shaping high quality steel products for electronics and electrical appliance manufacturers – with a total design capacity of 10 million products/ completed investment in phase 1, with a capacity of 2 million products/year. Since February, the project has completed trial run and officially joined the global supply chain. The joint venture VSSC Steel Center Co., Ltd. – a specialist in manufacturing high-quality steel products for Samsung Group – has completed the construction investment and put it into stable operation since the beginning of the year.

This year, SMC Steel has set an investment budget of VND 350 billion for the expansion of the SMC Da Nang steel processing plant, the Sendo steel pipe factory, the SMC Phu My precision mechanical factory phase 1 and the new investment in the factory. equipment and automatic SMC Phu My.

A newly established enterprise Vina Roma has just proposed to invest in the Quang Tri Iron and Steel Complex project in the Southeast Quang Tri Economic Zone with a total investment of about 47,810 billion VND. The project aims to produce construction steel, section steel and hot rolled steel plate with a capacity of 4.5 million tons of product steel per year, diverging investment into 3 phases with an expected investment schedule of 5 years.

Behind the project are owned enterprises operating in the field of transportation equipment, building materials, industrial chains, project investment and individuals related to these businesses.

Invest on a prudent and selective basis

Investment lessons using great leverage from the period before 2018 have left steel businesses with profound experience. Therefore, with this investment expansion plan, the leaders of the companies expressed a certain caution.

Famous for his opinion of “eating well and wearing durable”, the head of Hoa Phat Group also shared about the guaranteed source of money for the ambitious investment plan Dung Quat 2. Of the capital of 80,000 billion VND, the business only borrowed VND 35,000 billion and the rest was self-balanced.

According to Mr. Long, steel consumption in Vietnam is still relatively low, about 240 kg/capita, this number is forecasted to increase to 350-400 kg/capita, so the increase in output will not cause a surplus. supply, the question is whether Hoa Phat has good competition or not.

At the same time, the group set a focus on upstream steel products (HRC) for Dung Quat 2 and 3 factories. This is an important steel material in the country that is still lacking and still has to import billions of billions of dollars each year. USD. Not only the domestic market, Hoa Phat aims to internationalize and open factories abroad.

Meanwhile, leader Nam Kim focuses on steel products in the high-end segment and promotes export markets for expansion plans. Mr. Vo Hoang Vu, General Director shared that the total capacity of domestic corrugated iron manufacturers is already in excess, so it must be directed to the export market. Besides, the high-end segment has not been exploited much. Nam Kim has a production orientation of products for household goods. Business leaders also revealed that in the past 2 years, they have cooperated with partners to research and create new products, which are relatively different alloys. The business is expected to launch at the end of the second quarter and the beginning of the third quarter of this year.

On the other hand, the investment process is also divided into 3 stages (400,000 tons each). The company is implementing phase 1, by 2025 implementing phase 2 and expected to complete by 2027. The Chairman of the Board of Directors affirmed, Nam Kim will invest on a prudent basis, in the period of 2022-2024, balance investment capital from retained earnings and amortization for the project. The unit does not need to borrow from credit institutions in the current period.

Nam Kim Steel targets the high-end product segment when investing in expansion.

With SMC, investment plans are directed to the outsourcing segment, penetrating into global supply chains. In August 2020, the company announced its participation in the supply chain of materials for Samsung in Vietnam. By early 2021, Samsung C&T and SMC signed a contract to establish a joint venture coil center (steel processing center) at Phu My 2 industrial park, Ba Ria Vung Tau.

According to SMC, joining the global supply chain through Samsung Group marks a new step, affirming capacity and quality, aiming to participate in exploiting new customer groups that are FDI enterprises moving investment. from the Chinese market.

In general, each enterprise relies on its strengths and accumulated foundation to accelerate investment, dominate the market and create a driving force for future growth. From the manager’s point of view, an investment plan is made based on a long-term vision and is difficult to change in the face of unfavorable fluctuations in the short term.

The steel industry is facing certain difficulties. According to VDSC, strict social distancing orders have weakened China’s domestic steel consumption and factories have had to reduce output while boosting exports. This situation has put pressure on the world price level, pulling the domestic finished steel price down sharply from the beginning of May until now.

However, VDSC also expects that the decrease in domestic steel prices will encourage demand to return after a period of silence from the beginning of April until now. On the other hand, China’s economic reopening from the beginning of June combined with policies to boost investment for its growth in the second half of the year can help steel prices as well as the prices of other manufacturing materials. steel exports soon recovered globally.

According to Ngoc Diem