Posted on 13 Mar 2020
Vietnam's steel outlook has worsened with coronavirus restrictions slowing economic activity and tightening credit available to steel mills and buyers.
The Vietnam steel association has informally told steel traders that domestic steel demand could fall by 35pc and steel exports drop by 20pc this year if the virus outbreak continues to spread in Vietnam. Cases have doubled to 35 people in four days, while 30,000 people have been isolated, with many areas blocked, steel traders said.
Vietnamese banks' more limited financial resources are being diverted to deal with and constrain the spread of the virus. Infrastructure projects have slowed, while banks are diverting credit to vital sectors. Banks have cut credit for the steel sector and added support to agriculture at the government's direction. Smaller mills are having problems obtaining letters of credit for seaborne trade.
Steel stocks are rising, sales are bad and companies cannot pay back the banks on time, a Vietnam-based trader said.
Even though demand is weakening, it is difficult for blast furnace-based mills to shut down, keeping supplies on line. March-May is typically the peak period for construction in Vietnam. The rainy season during June-November limits construction, so long product demand has a limited chance of an increase this year, traders said.
Steel import will likely be affected until the end of March with buyers coming back in April for May-June shipments, Vietnam-based traders and buyers said. Inventories may bottom out by then if spot purchases remain stalled, or buying could re-emerge if seaborne prices are low enough to attract interest.
Vietnam's crude steel production rose by 30pc to 20.1mn in 2019 from 15.5mn t in 2018, according to World Steel Association data.
Source:Argus
