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Report Overview – Blast Furnace Steel Industry – 2023

Salient Nature/Key Features of the Industry

• Vietnam’s steel consumption and production are the highest in ASEAN, driven by the growing construction industry and the recent development of integrated blast oxygen furnace (BOF) capacity.
• Crude steel production via BOF accounted for 62% of total output in 2021. BOF has become the dominant crude steel production method in 2018 surpassing the Electric arc furnace (EAF) method following the entrance of Formosa Ha Tinh (FHT) in 2018, and Hoa Phat Group (HPG)’s Dung Quat integrated steel mill in 2020.
• Vietnam is well-positioned to build large BOF capacity, attributable to its ample domestic iron ore reserves and access to deep-water ports.
• Vietnam’s protectionism tariffs on semi-finished steel and finished steel products are perceived to benefit integrated BOF players such as HPG and FHT, whilst penalising smaller EAF players and downstream players that are not integrated.

Value Chain/Business Model

• Blast furnace steelmakers use domestic & imported iron ore and imported coking coal to produce semi-finished products and into:
• Long steel products (mainly used in the North, for construction)
• Flat steel products, consisting of pipes (for construction) and sheets (for automobile and shipbuilding industries, mainly used in the South)

Others

• Whilst there are many electric arc furnace players in Vietnam, the blast furnace steel market is highly concentrated, with the competition mostly between HPG and FHT, which accounted for 33% and 29% of the industry’s crude steel capacity in 2021.
• HPG is the most dominant player and the price-setter for the steel industry, having the lowest production cost and the largest market share in long steel and pipes as of 2021.
• This is attributable to HPG being the only fully integrated steelmaker in Vietnam, and having access to deep water ports (for importing iron ore).

 Blast Furnace Steel Industry Value Chain

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1. (1) Industry Overview

• Leading Steel Consumer and Producer in ASEAN, Driven by the Strong Construction Sector and Development of Integrated Steel Mills; Hoa Phat Group Dominates the Concentrated Blast Furnace Industry
• BOF Dominates Steelmaking, Leveraging on the Availability of Iron Ore Reserves and Port Facilities in the Country
• Government Measures to Develop Integrated Supply Chain Benefits Large-Scale Players, Whilst Penalising Small-Scale Ones

1. (2) Market Trends

• Vietnam’s Steel Production is Gradually Shifting to BOF Driven by Recent Capacity Additions
• Growing Steel Demand Driven by Vietnam’s Booming Construction Sector
• Rapid Production Expansion Attributable to New Capacity Additions; Production Remained Buoyant During 2020 Attributable to Strong Exports Growth
• Strong Growth in Exports as Vietnam Becomes Less Reliant on Imports From Additional Capacity; Strong Export Potential Given Competitive Production Cost and US-China Trade Tensions

1. (3) Competitive Trends

• Limited Number of BOF Producers in Vietnam, with Hoa Phat Group Holding a Clear Advantage Due to Low Production Cost
• Hoa Phat Group: Most Dominant Integrated Steel Player in Vietnam
• Formosa Ha Tinh Steel Corporation: First HRC Producer and Second-Largest Crude Steel Producer in Vietnam