Vietnamese steel pipe prices to increase
----Interview with Brilliant Lim
Deputy General Manager
Vietnam Germany Steel Mill Joint Stock Company
- Founded in 2002, Vietnam Germany Steel Mill Joint Stock Company is located in Binh Xuyen Industrial Zone, Vinh Phuc province. Vietnam Germany Steel Mill became the listed company on Hanoi stock exchange in 2008, with the stock exchange symbol of VGS. Acting as the second largest steel pipe producer in Vietnam, the company reports an annual steel pipe production capacity of 700,000t. Meanwhile, it also produces wire rod, rebar, HGI coil, with the total production capacity of 2 million tons per year.
- Asian Metal: Hello, Mr. Lim. Thanks for joining the interview. Please could you briefly tell us about your company.
- Mr. Lim: My pleasure. Vietnam Germany Steel Mill Joint Stock Company stays among one of the leading steel producers in Vietnam. We mainly produce steel pipe, including carbon steel welded pipe, HGI welded pipe, HGI square pipe and shaped pipe (used for doors, windows, and staircase handrails). The grades of square pipe range from 10mm*10mm to 170mm*170mm, and the diameters of round pipe hover between 16mm to 219mm. Presently, we have 19 steel pipe lines, with the annual production capacity of 700,000t. Besides, wire rod and rebar act as our major products, with an annual production capacity of 700,000t. Meanwhile, we also produce CRC, HGI coil, with most consumed by ourselves and few sold, with an annual production capacity of 600,000t.
- Asian Metal: How about the capacity utilization of your company this year? Does it witness obvious change compared with last year?
- Mr. Lim: We maintained the low operation rate since early this year. Therein, though prices went up and the sales performance improved in the first quarter, we consumed previous stocks and maintained the operation rate of around 50%, and kept it unchanged in Q2 and Q3 when prices fell. Nowadays, the capacity utilization for steel pipe stays below 50%, similar to 2022, but we ran fully of all the steel pipe lines before 2020, when the capacity utilization for rebar achieved 80% at that time. We believe the replacement of old industry performs as the main reason for the production cut. Plastic pipe replaces steel pipe gradually. Presently, only industries of fire protection, oil, gas, construction, light building partition, and furniture use steel pipe. Besides, the overall economy remains gloomy after the pandemic and the demand shrinks.
- Asian Metal: Where do you buy raw materials? How many stocks do you have?
- Mr. Lim: We mainly purchase raw materials within Vietnam at the moment. The two existing HRC producers provide enough materials for us. Before local steel mills launching production about eight years ago, we imported HRC from Malaysia and Thailand. We normally build stocks for one-month production, with approximately 10,000t in hand.
- Asian Metal: How do you allocate your steel pipe ooutput? How about the proportion of agents and end users?
- Mr. Lim: We deliver most steel pipe to agents, with few sent to end users directly. Normally, orders from end users such as those from steel frame factory and furniture factory remain scattered, and thus we prefer to cooperate with large traders. We build stocks of approximately 50,000t for steel pipe, and could guarantee the regular demand of traders. For special pipe like shaped pipe, the delivery takes around three months.
- Asian Metal: Please talk about the demand for steel pipe in Vietnam.
- Mr. Lim: The current demand remains similar with the corresponding period of last year, but shrinks by about 50% compared with 2019. Actually, the demand from downstream industries increased right after the Lunar New Year, and the market recovered, but the market turned to dim again in Q2 and Q3. The market performance improved recently boosted by the upward price trend of raw materials, but the demand remained far from strong. We guess it takes 10 years to recover fully.
- Asian Metal: Does your production and sales witness changes dragged by the recession in America the Europe? How do you respond?
- Mr. Lim: Under the world economic integration, the economic recession in Europe and America will surely reduce imports of industrial products from Vietnam. The decreasing exports in downstream products would cut the consumption of raw materials for steel pipe. Nowadays, our factory does not directly export much steel pipe, either because of less advantage in prices or the high requirement in quality, and most of them were exported as industrial products processed by customers. Our factory committed to improving product quality and improving after-sales service, striving to occupy a place in the market.
- Asian Metal: How do you think of the price trend for steel pipe before the end of the year?
- Mr. Lim: Traditionally, with the end of the rainy season, the progress of construction projects accelerates, and the demand for construction steel and steel pipe strengthens. However, we do not see any signs of improvement in demand so far this year. The uncertainties of the world economy and negative news restrain the demand for steel pipe from recovering. Currently, the mainstream prices of steel pipe hover at around VND17,000,000/t (USD702/t). Given the upward price trend of raw materials, we believe prices of steel pipe might hike to VND18,000,000/t (US743/t) before the end of the year.
- Asian Metal: Do you plan to expand production in 2024?
- Mr. Lim: Absolutely. We plan to launch 10 steel pipe lines in early 2024, majoring in producing API pipe and oil pipe, with the investment of around VND16.68 trillion (USD684 million). Then, the steel pipe production capacity would hike by 2 million tons, and the thickness reaching 26.2mm, diameter achieving 508mm. Therein, one line covers an area of about 300 meters in length and 50 meters in width, requiring a large amount of new land. We investigate the market and assess the demand and negotiate with equipment suppliers at present.
