Vietnam’s steel production sector is initiating the transition towards greener practices and emission reduction to meet the criteria set by major markets like the EU.
In 2021, Vietnam’s steel industry achieved a record high, exporting steel and iron worth $1.9 billion to the EU. However, the export landscape for Vietnamese steel into the EU has become more challenging since the EU implemented the first phase of the Carbon Border Adjustment Mechanism (CBAM) in October. The EU stands as Vietnam’s second-largest export market for steel, comprising 18.37% of total sales. In 2022, Vietnam exported around 8.4 million tonnes of steel, with the EU accounting for 16%, approximately 1.3 million tonnes.
Under the CBAM, the EU imposes a levy on imported goods based on the greenhouse gas emissions intensity (GHG) during the production process.
The initial phase of CBAM focuses on certain high-risk goods for carbon leakage, including cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. These sectors contribute to 94% of the EU’s industrial emissions.
Initially, importers are required to report the quantity of imported goods and embedded GHG amounts without financial payments. Starting from 2026, importers must purchase a CBAM certificate following the EU’s carbon pricing system if emissions surpass the bloc’s standards.
The steel industry has significantly contributed to export turnover. In 2021, Vietnam exported 13.1 million tonnes of iron and steel worldwide, valued at $11.8 billion. In 2022, steel exports reached approximately 8.4 million tonnes, totaling $7.99 billion, a $3.8 billion decrease year-on-year.
Vietnam’s steel industry boasts substantial production capacity, exporting billions of dollars’ worth of steel to the EU and demanding markets like the UK, the US, and Japan, meeting stringent international standards.
Vietnam ranks as the 11th largest partner for goods imported into the EU. Beyond aluminium, steel, and cement, carbon-intensive industries such as textiles, garments, footwear, and certain agricultural products like rubber and coffee must also adjust to stricter standards in the EU and potentially in other markets.
In 2022, Vietnam’s exports to 27 EU member countries amounted to $47.15 billion, marking a 17.5% increase year-on-year. Imports from the EU to Vietnam reached $15.3 billion, resulting in a trade surplus of $31.8 billion for the country.
