Is Vietnam’s New Steel Strategy Solving the Right Problem?

In the week before the Lunar New Year, the Government of Vietnam released a new strategy for developing the local steel industry through 2050, setting a crude steel production growth target of 7 to 8 percent a year.

It also details plans for new production centres and logistics and investment drivers, though when it comes to selling more steel, it is short on details.

This matters because Vietnam doesn’t look to have a capacity problem.

Vietnam’s steel industry produced nearly 31 million tonnes of steel in 2020, according to National Statistics Office data. Last year, however, its output was just 23 million tonnes, suggesting there is at least room to produce another 8 million tonnes a year.

Add to that, the revenues of Hoa Phat Group, Vietnam’s biggest listed steel producer, are up 4.3 percent over 2021, yet net profit is less than half of its 2021 peak, and a picture emerges of weak pricing power and discounting pressure, often symptomatic of an oversupplied market.

This assertion is also in line with housing crises in both Vietnam and China in 2022, the impacts of which were two-fold: local demand fell, but also cheap Chinese steel flooded onto the Vietnamese market.

In fact, import prices went from an average of US$1,098 a tonne in 2021 to US$892.78 a tonne last year, in nominal terms, a decline of just under 19 percent, according to Vietnam Customs data.

This also hit external demand, too, with exports down 23 percent in terms of volume, and 43.82 percent in value, over the same period.

On that note, in 2021, Vietnam exported 2.6 million tonnes of steel to China, but in 2025, that number had come down to just 5,581 tonnes.

That is to say, where Vietnam’s steel industry has a demand problem, it is in big part on account of external factors beyond its control.

This puts a lot of pressure on domestic demand to drive growth.

The real estate sector, however, is unlikely to return to its pre-2022 crisis high for some time, assuming lessons with respect to borrowing too much and expanding too fast have been learned.

There is also a proposal on the table for a high-speed railway project from Hanoi to Ho Chi Minh City that will need hundreds of kilometres of steel tracks. It’s not guaranteed, however, that this will actually go ahead — it’s still not clear who will build it or how it will be paid for.

Then there is Vingroup, which is talking about localising its steel supply for its electric car-making arm, VinFast.

Through its subsidiary VinMetal, it has reportedly already started work on a 461-hectare steel plant in Ha Tinh and has also signed a steel supply deal with struggling steelmaker Pomina Steel. 

That aside, there is nothing to guarantee any new demand will go to local producers. Many of Vietnam’s free trade agreements restrict unequal treatment of foreign enterprises in procurement tenders and have reduced import tariffs in many cases to zero, making foreign imports more competitive.

This can, of course, be mitigated with antidumping and countervailing duties, and Vietnam already has several in place, including on Chinese hot rolled steel and South Korean galvanised steel.

But these go both ways — the USA and EU, for example, have antidumping duties on Vietnamese galvanised steel and flat hot rolled steel, respectively.

There is also significant external market exposure on input materials.

While Vietnam has estimated reserves of 1.3 billion tonnes of iron ore, the sector is largely underdeveloped. Of note, an ore development strategy announced in 2014 set a production target of 17.5 million tonnes of iron ore per year by 2020, but it has reached just a fraction of that, at roughly 3 million tonnes a year.

This has typically been offset by ore imports; these are, however, subject to global ore prices and are generally paid for with US dollars, making them susceptible to currency fluctuations.

And all of this should be thought of in terms of opportunity cost, as well.

Government support is finite. If state-owned banks, for example, are directed to steer credit toward the steel industry, that’s capital that is not available to small and medium-sized manufacturers, high-tech firms, or renewable energy developers.

That is to say, the focus of the steel strategy announced earlier this month, on supply rather than demand, seems misplaced in the current climate.

There is also a risk that it will steer steel firms toward scaling up their businesses for demand that might never materialise, creating an oversupply that forces prices down and damages the industry’s long term viability, and Vietnam’s long-term growth prospects by extension.

The Data

Steel imports

Steel exports

Steel production