Recently, Hoa Phat Steel (HOSE: HPG) has significantly lowered its hot-rolled coil (HRC) prices amid weak demand and intense competition with China.

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

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

Hoa Phat's price reduction comes in the context of weak domestic demand and pressure to compete with cheap steel from China.

Controversy Over Chinese Steel

The issue of competition with Chinese steel has been prominent recently, especially as Vietnam ramped up imports 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 from China is likely the main factor behind this situation. Since Q1 2023, Chinese HRC prices have fallen from 618 USD/ton to around 520-560 USD/ton. Meanwhile, Hoa Phat and Formosa's HRC selling prices are about 50-60 USD/ton higher.

In this context, Hoa Phat and Formosa – the only two HRC producers in Vietnam – proposed anti-dumping duties on Chinese steel on March 19.

Nguyen Viet Thang, General Director of Hoa Phat (HOSE: HPG), said this move aims to prevent unfair competition and below-cost selling from China. According to him, in recent years, China's economy has slowed down, while the real estate and construction sectors have faced crises. This has led to a severe steel oversupply in China, forcing them to sell abroad.

“When China has a large oversupply, companies accept to sell at a loss. Many Chinese steel companies incurred losses last year; they accepted to sell below cost to ensure their products were sold,” he said.

However, this proposal faced strong opposition from nine companies that use HRC as the main raw material to produce galvanized steel, steel pipes, structural steel, and other steel products, such as Nam Kim, Hoa Sen, and Phuong Nam.

These companies argue that the dumping margin of HRC imported from China into Vietnam is only 1.26%, not exceeding 2%, so it cannot be considered dumping. They also say that importing HRC is reasonable as domestic supply is insufficient to meet demand. Specifically, Vietnam's HRC consumption demand is around 10-13 million tons/year, while the total designed production capacity of HRC in Vietnam is only 8.2 million tons/year.

The group of nine companies believes that if Vietnam initiates an anti-dumping investigation on imported HRC products, it will have extremely negative consequences not only for the steel industry but also for the entire economy and society. “Any adverse developments in the HRC raw material supply could impact the entire steel industry,” according to the joint letter from the companies.

Meanwhile, Vu Van Thanh, Deputy General Director of Hoa Sen Group (HOSE: HSG), stated that initiating an anti-dumping investigation only benefits a few companies. He also expressed concerns about "the possibility of monopolization and price manipulation leading to excessively high raw material prices, causing the galvanized steel and steel pipe industry to collapse," the Hoa Sen Steel executive warned. "When HRC steel prices increase, finished product prices rise accordingly, and consumers will bear this cost difference."

Source: Vietstock