Vietnam on the move – steel conference follows Obama in vibrant country

A week after US President Barack Obama and his entourage vacated the JW Marriott hotel in Hanoi, some 600 international steel market participants moved in. It would be stretching things to say that some of the excitement of Obama’s historic visit to Vietnam hung in the air. Rather, the upbeat vibe was due to the record number of delegates, along with 50 exhibitors, that had gathered in Hanoi for the South East Asia Iron & Steel Institute’s annual conference.

The presidential visit and record turnout for SEAISI’s conference had one major thing in common: acknowledgement that Vietnam is fast becoming an increasingly important country in the region. For the steel industry, it offers strong steel demand growth – and there are few places in the world that can be said about currently.

Attending the conference provided this reporter’s first opportunity to revisit Vietnam since 2003 – the last time as a scruffy backpacker “between jobs” – and the changes since then were plain to see.

Workers at Pha Rung shipyard. - Photo by Oscar Tarneberg (TSI)

Bicycles have largely been upgraded to scooters, and many scooters have been upgraded to cars. Infrastructure has improved markedly, evidenced by the splendid (and nearly empty) new highway between the port city of Hai Phong, where a conference group had visited the Pha Rung shipyard, and the Vietnamese capital, 120km away. The smooth journey came to an abrupt halt, however, on reaching the Hanoi ring-road, as an accident had caused near gridlock on the clearly inadequate three-lane road. This event elicited fears from one American delegate in the minibus that Hanoi would soon “go the way of Jakarta or Mexico City” by becoming just another traffic-snarled and polluted city when vehicle uptake grows.

For now, few Vietnamese can afford cars (just one car for every 12 families it has been estimated) and it is the low salaries that are attracting manufacturing companies to set up facilities in the country. In some cases, operations are being relocated to Vietnam from China where wages are far higher. Vietnam is also blessed with a large, young, educated – and clearly motivated – workforce.

Biggest steel producer in ASEAN region

Source: SEASI

Vietnam overtook Thailand in 2015 to become the largest steel user in the ASEAN region, with apparent steel consumption jumping 26% y-o-y to 18.3 million metric tons, of which almost 14 million mt were imported. Some respected analysts believe Vietnam has the potential to double its steel consumption over the next decade or so. The Vietnam Iron & Steel Association has forecast steel consumption of 20 million mt in 2017.

The country also hosts Formosa Group’s new Ha Tinh integrated steelworks, perhaps the region’s most ambitious new project which could one day produce 22 million mt/year of long and flat steel products. In the opinion of one conference attendee, “Ha Tinh will completely change the face of South East Asia’s steel industry.”

Vietnam has stepped up its trade measures against steel imports, particularly from China, and no doubt more battles lie ahead as it tries to carve out space for domestic producers, including Formosa, to benefit from the country’s ongoing development.

Economy buoyant

On the move in Hanoi. - Photo by Oscar Tarneberg (TSI)

Vietnam’s economy grew 6.68% in 2015 and will stay at a similar level this year, according to the Vietnamese government. S&P Global Ratings expects Vietnam’s real GDP per capita to rise by 5.6% this year, compared with 5.3% in 2015, and grow at an average of 5.2% over 2016-2019. It would be stronger but for the “modest outlooks for Vietnam’s trading partners”, the ratings agency said.

Either way, the future looks bright for this South East Asian country of almost 90 million people. Infrastructure and property investment will provide strong demand for steel, as will manufacturing if and when Vietnam transforms from assembly and light manufacturing to primary production.

Challenges undoubtedly remain from overcapacity, competition from China, high inflation and a less-than robust banking sector. But Vietnam is a country on the move and judging by the 600-strong delegation and buoyant exhibition hall at SEAISI’s conference, this is widely-recognized by the wider steel industry – not to mention US presidents.