The steel sector in Vietnam

When compared to its larger Asian neighbours, Vietnam is a relative minnow in terms of its steel market but it is also the fastest growing in the region. In the five years to 2016, apparent consumption has more than doubled to 22.3 million tonnes with a 22% growth in last year alone. This growth has seen a similar rise in Vietnamese imports which have also more than doubled in the five year period to 2016 to reach 19.5 million tonnes. As would be expected, by far the largest external supplier to the country is its neighbour China, accounting for 60% of all imports last year. Vietnam is also an important market for Chinese producers, being the second largest behind South Korea.

With a steady increase of over 6% in the country’s GDP forecast for this year, a similarly favourable outlook for the construction industry and an automotive market that was the second fastest growth market globally last year, it would seem that Vietnam is an important market for Asian steel producers going forward.

This may not actually be the case, however. Traditionally Vietnam produces relatively large amounts of long products as well as cold rolled and coated flat products. These producers rely on hot rolled feedstock from abroad, however, as the country lacks the facilities to produce HRC, which makes up around half of all imports into the country. This is a situation that the authorities in the communist nation are looking to address. According to the Vietnamese Steel Association’s Vice Chairman, in the next five years, the trade deficit in the steel industry is expected to decrease as two steel makers, Hoa Phat and Formosa, start to produce HRC. In order to achieve this aim, the Ministry of Industry and Trade is going to apply trade defence measures to ensure fair competition with import products.

So far this year, Vietnam also has the fastest growth in steel output of any country in the world. In the first half of 2017, crude steel production has doubled to 4.7 million tonnes. This has come at the cost of imports, which have declined by around 20% in the same period, the first year-on-year decrease in imports since the fallout from the global recession post-2018.

It would seem then, that the measures put in place to boost the domestic steel industry are working, and at the detriment of imports from overseas suppliers. So far, given the strength of the steel market in China, this has not had a detrimental effect on the world market due to displaced tonnage but another fast developing steel market investing in internal capacity and erecting trade barriers cannot be a long term benefit for the global industry.

The text above was prepared by ISSB.

You can download a file showing exporters to Vietnam last year by visiting the ISSB website.

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