Vietnam's Steel Sector: A Catalyst for Economic Growth Amid Global Challenges

Vietnam's steel industry has emerged as a linchpin of its economic transformation, driven by robust domestic demand and strategic supply-side reforms. With production projected to grow by 8–10% in 2025, reaching 31 million tonnes, the sector is not only fueling infrastructure development but also navigating global trade complexities to position itself as a regional leader. This article explores how Vietnam's macroeconomic resilience and structural reforms are shaping the steel market's trajectory—and what investors should watch.

Steel Production: Growth Amid Structural Shifts

Vietnam's steel industry is undergoing a quiet revolution. Domestic demand for finished steel is expected to hit 24.5–25 million tonnes in 2025, a 4.5% rise from 2024, with the construction sector accounting for 89% of total consumption. However, the product mix is evolving. Flat products like cold-rolled coil (CRC) and zinc-coated steel are gaining prominence, now constituting 56% of demand—up from 53% in 2023—due to rising demand from automotive and appliance manufacturing.

This transition is not without challenges. Overcapacity in long products like rebar and structural steel threatens margins, while trade barriers loom large. The U.S. imposed 25% tariffs on Vietnamese steel imports in March 啐 2025, and the EU's Carbon Border Adjustment Mechanism (CBAM) could further complicate exports unless producers adopt low-carbon technologies.

Macroeconomic Tailwinds: Infrastructure and Investment Drive Demand

Vietnam's 7.5% GDP growth in the first half of 2025—the highest since 2011—stems largely from public investment, which reached $11.7 billion in disbursements by June 2025. These funds are channeling into transformative projects like the Long Thanh International Airport and the North-South high-speed railway, directly boosting steel demand.

The private sector is also stepping up. Companies like Hoa Phat Group and Formosa Ha Tinh Steel (FHS) are expanding capacity and pivoting to high-value products. Hoa Phat, for instance, is investing in railway tracks and automotive-grade steel, targeting export markets beyond construction. Meanwhile, FHS aims to double its production capacity to 14.8 million tonnes by 2035, leveraging its scale to compete globally.

Supply-Side Reforms: Green Steel and Technological Upgrades

The government's Steel Industry Development Strategy to 2030 mandates a 40% reduction in carbon emissions by 2030, aligning with its 2050 net-zero target. This is driving innovation:

• Hoa Phat is adopting electric arc furnaces (EAF) to reduce reliance on carbon-intensive blast furnaces.
• FHS is exploring hydrogen-based steelmaking to meet EU CBAM requirements.

These moves are critical to unlocking export potential to the EU, which currently imposes provisional anti-dumping duties on Vietnamese hot-rolled steel.

Risks and Investment Considerations

Despite the optimism, risks persist:

1. Trade Barriers: U.S. tariffs and EU CBAM compliance costs could compress margins unless producers adapt quickly.
2. Overcapacity: The industry's 50–60 million-tonne capacity target by 2030 risks oversupply, especially in long products.
3. Global Commodity Prices: Tin, a key input for galvanized steel, remains volatile due to supply constraints in regions like Yunnan, China.

Investment Takeaways:
- Focus on Diversified Players: Companies like Hoa Phat and Pomina that are transitioning to high-value, low-carbon products are well-positioned.
- Monitor Trade Policy: Investors should track U.S.-Vietnam trade negotiations and CBAM compliance progress.
- Infrastructure Bonds: Vietnam's $140 billion infrastructure plan offers opportunities in construction-linked sectors.

Conclusion: A Steel Stronghold in Southeast Asia

Vietnam's steel sector is a microcosm of its broader economic ambitions: leveraging domestic demand, technological innovation, and strategic reforms to carve out a global niche. While trade wars and overcapacity pose hurdles, the industry's adaptability and the government's commitment to green growth suggest a promising trajectory. For investors, the steel sector—and the infrastructure boom it supports—remains a compelling entry point into Vietnam's rising industrial might.

Stay vigilant to policy shifts, but do not overlook the steel sector's role in building Vietnam's future.