Competing with China, Hoa Phat lowers HRC steel price to 550 USD/ton

Recently, Hoa Phat Steel (HOSE: HPG) has sharply reduced the selling price of hot-rolled coil (HRC) amid weak demand and fierce competition with China.

On April 1, Hoa Phat reduced the price of HRC by USD 40/ton, bringing the price of SAE1006/SS400 for June 2024 delivery to USD 550/ton (CFR), excluding VAT.

This price is equivalent to VND 13,740/kg, down VND 980/kg compared to the previous month. According to a trader in Hanoi, the current price is "very low". Meanwhile, HRC offers from China increased by USD 10/ton to USD 550/ton as steel futures contracts recovered on April 1.

Hoa Phat's price cut comes amid weak domestic demand and pressure to compete with cheap steel from China.

Controversy over Chinese steel

The issue of competition with Chinese steel has also emerged recently, especially when Vietnam increased its import of 1.4 million tons of HRC from China, accounting for 74.2% of total HRC imports in the first two months of the year.

Cheaper steel prices from China are probably the main factor leading to this situation. Since the first quarter of 2023, China's HRC prices have decreased from 618 USD/ton to about 520-560 USD/ton. Meanwhile, the selling price of HRC steel from Hoa Phat and Formosa is about 50-60 USD/ton higher.

In that context, Hoa Phat and Formosa - the only two HRC producers in Vietnam - proposed to impose anti-dumping tax on steel from China on March 19.

Mr. Nguyen Viet Thang, General Director of Hoa Phat (HOSE: HPG), said that this move is aimed at preventing unfair competition and selling below cost from China. According to him, in recent years, China's economy has slowed down, while the real estate and construction industries have faced crisis. This has led to a serious oversupply of steel in China and forced them to sell abroad.

"When China has too much oversupply, businesses accept selling at a loss. Many Chinese steel businesses suffered losses last year, so they accepted selling below cost to ensure they could get their products out," he said.

However, this proposal has met with fierce opposition from 9 enterprises using HRC as the main raw material to produce galvanized steel products, steel pipes, structural steel and other steel products, such as Nam Kim, Hoa Sen, Phuong Nam...

This group of enterprises argued that the dumping margin of HRC imported from China to Vietnam is only 1.26%, not exceeding 2%, so it cannot be considered dumping. According to them, importing HRC steel is also reasonable when domestic supply is not enough to meet demand. Specifically, Vietnam's HRC consumption demand is in the range of 10-13 million tons/year, while the total designed capacity of HRC production in Vietnam is only at 8.2 million tons/year.

These 9 enterprises believe that if Vietnam initiates an anti-dumping investigation on imported HRC products, it will cause extremely negative consequences not only for the steel industry but also for the entire economy and society. “Any adverse developments occurring with HRC raw materials can affect the entire steel industry,” quoted from the joint dispatch of the companies.

Meanwhile, Mr. Vu Van Thanh - Permanent Deputy General Director of Hoa Sen Group (HOSE: HSG) - said that initiating an anti-dumping investigation would only benefit a few enterprises, and expressed concern about "the possibility of monopoly and price control leading to raw material prices being pushed up too high, causing the entire galvanized steel and steel pipe industry to collapse," the leaders of Hoa Sen Steel are concerned. “When HRC steel products increase, the price of finished products increases accordingly, and consumers will bear this difference.”

Vu Hao

FILI