Steel shares rise, riding on high hopes hinh anh 1A Hoa Phat worker checks the quality of construction steel. (Photo: VNA)

Hanoi (VNA) -
Shares of average-sized steel firms listed on the local market recovered, thanks to the expectation of positive business results from rising steel prices in the first quarter of 2016.

The shares of Tien Len Steel Corporation (TLH) have increased in value from 3,400 VND to 6,200 VND each since early this month. On March 29, nearly two million TLH shares were traded at a ceiling price of 6,600 VND each.

Nguyen Manh Ha, TLH Chairman, said the shares were selected as investors thought his firm would register better business results. Ha said he had imported nearly 300,000 tonnes of steel, three times more than the normal inventory level of 100,000 tonnes. Now the price of steel is 30 percent higher than the rate at which he had bought it.

Thus, TLH expects to earn 80 billion VND in after-tax profits. It also expects to have at least 170 billion VND by the end of Q2 to clear the losses it suffered last year due to lower market prices of steel. Ha expects to earn a margin of 25 to 50 percent on its charter capital.

Like Ha's firm, other average-sized steel firms that faced losses in 2015 have also recovered. When the price of steel dropped globally by about 30 percent last year, steel firms faced losses as they had bought it at high prices, but could sell at low prices only. Now thanks to higher prices, most of the steel firms have recovered.

SMC Trading Investment Joint Stock Company (SMC), which lost 195 billion VND last year, has set a target of earning 60 billion VND in profits this year. Since the beginning of this March, SMC shares rose from about 7,000 VND to 9,500 VND each on the stock market.

Thien Nam JSC (TNA) said it had recently sold its entire inventory last year for an extra 3,000 VND per kilogram, selling one kilogram at 10,000 VND to 11,000 VND. Within a month, TNA shares rose from 37,000 VND to 56,000 VND each on the HCM Stock Exchange.

DIC Trading and Investment JSC (DIC), seeing the market trend, bought steel at 285 USD per tonne. Now it has sold it for 350 USD per tonne.

While most of the firms' leaders feel the prices are under a demand-supply rotation, the price should recover this year after staying lower than the input price for a whole year.

Nguyen Ngoc Anh, Chairman of SMC, also said there was another reason for the current increase in steel prices. He said the Australian iron ore, which supplies 70 percent of the demand in China's market calculated a 6 billion USD loss in the last six months of 2015. Then, it suddenly raised the prices of iron ore by 20 percent on March 7.

Most of the firms said though steel prices did not have a sustainable recovery, they had already helped the firms to achieve better results in the first quarter to recover the losses suffered in 2015.

Meanwhile, local giant steel enterprises such as Hoa Phat and Hoa Sen have forecast better margins, thanks to the rising prices. Last year, the two firms remained profitable, even when steel prices fell, thanks to their brand value and good distribution systems.-VNA