[SMM Hot Topic] China's Largest Export Market - Detailed Analysis of Vietnam's Steel Industry

Vietnam is the Sixth Largest Economy in ASEAN and Its Steel Market Shows Strong Growth

According to data compiled by SMM from the World Steel Association (WSA), Vietnam is one of the major steel producers in Southeast Asia. In 2023, Vietnam's crude steel production reached 19.2 million mt, with its ranking among the world's major crude steel producers rising steadily from 18th in 2017 to 12th in 2023, showing rapid development.

Vietnam's steel production has not only grown rapidly but also become increasingly diversified. According to the chairman of the Vietnam Steel Association (VSA), since 2015, Vietnam's steel industry has developed into one of the leading manufacturers and sellers of finished steel products in ASEAN. In 2023, Vietnam's finished steel production was approximately 19 million mt, with long products (wire rods, rebar, sections) accounting for 12.5 million mt and HRC and strip steel production around 6 million mt.

Vietnam's steel enterprises are mainly concentrated in Hanoi, Ho Chi Minh City, and other coastal cities. These areas benefit from convenient port logistics, facilitating international trade. Major domestic companies such as Hoa Phat Group, Formosa Ha Tinh Steel Corporation, and Vietnam Steel Corporation dominate the domestic market while actively expanding internationally. They enhance their market competitiveness by introducing advanced production technologies, improving product quality, and expanding production scale. Hoa Phat Group and Formosa Ha Tinh ranked 58th and 65th in WSA's 2023 major steel companies' production rankings, with outputs of 6.7 million mt and 5.7 million mt, respectively, accounting for nearly 80% of Vietnam's steel market.

Vietnam is the largest steel demand market in Southeast Asia, with the construction industry dominating its consumption. In 2023, Vietnam's apparent steel consumption (finished steel) was approximately 22-23 million mt, down 8% YoY, ranking first among ASEAN countries. In H1 2024, although Vietnam's socio-economic situation continues to improve, with overall conditions better than the same period, and industrial production maintaining growth, the growth trend in the steel industry has not significantly improved. Specifically, according to VSA statistics, Vietnam's finished steel sales in H1 2024 totaled 14.274 million mt. SMM, combined with WSA statistics, forecasts Vietnam's finished steel consumption demand in 2024 to be around 22-24 million mt.

According to VSA statistics, the construction industry dominates Vietnam's steel consumption, accounting for about 89%, with household appliances at 4%, machinery at 3%, and automotive, oil, and gas each at 2%. Therefore, the development of the construction industry directly influences the entire steel demand market in Vietnam. However, the construction industry-led steel market has led to an increase in long product production and capacity surplus, prompting Vietnam to export excess capacity. Overall, Vietnam's steel industry has a 30% external dependency. The weak sheet production capacity makes Vietnam highly dependent on sheet imports. Next, let's analyze Vietnam's steel import and export situation.

From the import perspective, China dominates Vietnam's import market. According to VSA data, in 2023, Vietnam imported approximately 13.33 million mt of various finished steel products, with an import value exceeding $10.4 billion, a quantity increase of 14.07% YoY, but a value decrease of 12.55% YoY. China was the largest supplier, accounting for over 62% of Vietnam's total steel import volume and over 54% of the total value, followed by Japan (14.3%) and South Korea (8.3%).

According to Vietnam Customs, Vietnam's hot-rolled steel imports have grown significantly over the past three years. In 2023 alone, Vietnam imported 9.64 million mt of hot-rolled steel, up 19% YoY from 8.1 million mt in 2022, accounting for nearly 72% of Vietnam's total steel imports. Construction steel imports were nearly 1.3 million mt, up 7.8% YoY from 2022 and 33% from 2021. Various galvanized steel imports were 1.16 million mt, up 20.68% YoY.

According to Vietnam Customs, in H1 2024, Vietnam's cumulative steel imports reached 8.2 million mt, equivalent to over $5.9 billion, up 48% and 25% YoY, respectively.

China remained the largest source of imports, with 5.7 million mt of steel imported from China in H1 2024, equivalent to over $3.66 billion, up 86% and 59% YoY, respectively, but the import price fell 14% YoY to $641/mt. Japan was the second-largest source, with imports totaling approximately 880,000 mt, down 2% YoY, with an import value of over $878 million, up 24% YoY, and an average import price of $1,000/mt, up 27% YoY. South Korea was the third-largest source, with imports of approximately 570,000 mt, up 11% YoY, with an import value of over $540 million, up nearly 1% YoY, and an import price of $951/mt, down 9% YoY.

With significant import growth, Vietnam has initiated multiple anti-dumping measures. Previously, due to the inability to produce high-quality steel, especially hot-rolled coils, domestically, policies exempting import taxes were proposed in various agreements and commitments. However, in recent years, the substantial increase in steel imports, coupled with low tariffs on most imported steel products, has been detrimental to the development of Vietnam's steel industry.

According to VSA, Vietnam's hot-rolled coil demand is around 12-13 million mt/year, while domestic production is about 9 million mt. The large influx of steel into the Vietnamese market, sometimes nearly 200% of domestic production, leads to imported goods taking over the sales share of domestic hot-rolled coils. Therefore, facing the influx of cheap hot-rolled coils, enterprises and experts believe that relevant authorities need to continuously establish and improve technical and quality management regulations and standards, and adopt reasonable defensive measures to prevent steel products that do not meet technical safety and environmental standards from entering the Vietnamese market. Consequently, Vietnam has initiated multiple anti-dumping investigations and various protective measures, as summarized by SMM from international relief network information.

From the export perspective, Vietnam's main export market is ASEAN, with exports to China declining. According to WSA statistics, in 2023, Vietnam's total exports of semi-finished and finished steel products were around 8.6 million mt. According to Vietnam Customs, in 2023, Vietnam's total steel exports exceeded 11.1 million mt, with an export value of $8.35 billion, up 32.6% and 4.5% YoY, respectively. Vietnam's main steel export market is ASEAN, with exports of 3.5 million mt. The EU market ranks second, accounting for nearly 23% of the national steel export volume, reaching nearly 2.55 million mt, up 86.2% YoY from 2022, with a transaction value exceeding $1.89 billion, up 29% YoY from 2022. Within the EU, Vietnam's exports to Italy, Belgium, and Spain have grown significantly. The US market follows, with total exports of nearly 1.08 million mt, up 58.8%, and a transaction value of $852 million, up 1.2%. Notably, steel exports to India increased nearly 5.2 times from 2022, reaching nearly 968,000 mt, with a transaction value exceeding $715 million, up 4.2 times. However, exports to China continued to decline, with only 558,000 mt, equivalent to $8.7 million, down 94.4% and 86.6% YoY, respectively.

In 2023, Vietnam's main exported steel products included rolled steel, galvanized steel, rebar, steel plates, and color-coated steel. Rolled steel had the largest export volume, reaching 4.2 million mt, valued at $2.6 billion, accounting for 37.9% of Vietnam's total steel exports, with a volume increase of 92.3% YoY and a transaction value increase of 57.4% YoY.

According to Vietnam Customs, in H1 2024, Vietnam exported 6.49 million mt of steel, up 20.5% YoY, with an export value of $4.777 billion, up 12.23% YoY.

Vietnam's top three steel export markets in H1 2024 were ASEAN (26%), the EU (25%), and the US (15%). Within ASEAN, Cambodia and Indonesia were major export destinations; within the EU, Italy was the leading market.

According to a representative of the Vietnam Steel Association, Vietnam's steel products are now exported not only to traditional markets in Southeast Asia but also to dozens of countries and regions worldwide. The rapid growth in steel export value has drawn attention from many countries, leading to increased trade investigations into Vietnamese steel. According to the Trade Remedies Authority of Vietnam's Ministry of Industry and Trade, besides the EU, the US is a potential export market for Vietnamese steel enterprises. However, with the increase in export volume, domestic steel must face more defensive investigations from this market. At this time, coordination between enterprises and domestic relevant agencies is crucial. Enterprises must establish a transparent accounting system and gain a deep understanding of trade remedy knowledge. By doing so, enterprises can build a "shield" to effectively respond to trade remedy investigations while protecting domestic production from unfair competition from imported goods.

Vietnam's strong steel demand currently maintains net steel imports, but exports may become a highlight in the future. Vietnam's domestic steel demand is strong, with the construction, machinery, and other steel-using industries still in a booming phase, indicating a positive outlook for steel demand. With the rapid growth in steel demand, Vietnamese steel producers will continue to implement previously announced projects and plan new facilities. According to current information, by the end of 2024, SunPro Steel may complete the first phase of its 500,000 mt/year plant project in Hau Giang Province; by 2025, Hoa Phat Group's 5.6 million mt/year blast furnace will be put into operation; in April 2025, Japan's Kyoei Steel plans to commission a long product rolling production line.

According to incomplete estimates, by year-end of 2025, Vietnam will add 2.8 million mt/year of pig iron, 6.5 million mt/year of crude steel, at least 6 million mt/year of slabs, 5.5 million mt/year of HRC, and 800,000 mt/year of long products capacity. With the completion of new plants, Vietnam's steelmaking capacity could increase by at least 14-17 million mt/year.

Currently, Vietnam still maintains a net steel import status, but if domestic capacity is put into operation as scheduled, Vietnam may actively export steel to alleviate domestic market supply pressure, with export growth potential not to be underestimated. Maybank Investment Bank also stated in its 2024 outlook report on Vietnam's domestic steel market that due to the impact of high-interest rate policies on Vietnam's major export markets, which are facing recession, Vietnam's domestic steel prices may fluctuate slightly in 2024. However, the strong export momentum could alleviate overall pressure on Vietnam's domestic steel market, becoming a significant highlight in the development of Vietnam's steel industry.