Steel Sector's Sustainability Shift

Vietnam's steel industry, a cornerstone of its industrial economy, is undergoing a transformative shift towards sustainability. The sector, which has propelled Vietnam to the forefront of ASEAN's steel production, now faces the imperative of reducing its carbon footprint to align with global environmental standards.

Hoa Phat Group's Green Steel Initiatives

Hoa Phat Group, Southeast Asia's largest steel producer, is at the vanguard of this green transition. The company has committed to achieving carbon neutrality by 2050. Its initiatives include implementing energy-efficient technologies, such as waste heat recovery systems and adopting closed-loop production processes. In 2024, Hoa Phat's Dung Quat facility generated 2.39 billion kWh of electricity from waste heat, meeting 90% of the plant's electricity demand .

VNSteel's Strategic Decarbonization Path

VNSteel, a state-owned entity, is also aligning with the green steel movement. The company has set a target to reduce carbon emissions by 5–10% by 2025, with an overarching goal of achieving net-zero emissions by 2050. VNSteel's strategy focuses on optimizing production processes and transitioning to renewable energy sources. Notably, 82% of its crude steel output is produced using electric arc furnaces, which emit fewer greenhouse gases compared to traditional methods

Vietnam's Emissions Trading Scheme Implementation

In June 2025, Vietnam launched the pilot phase of its emissions trading scheme, targeting major carbon-emitting sectors, including steel, cement, and thermal power. The scheme, covering approximately 50% of the nation's CO₂ emissions, mandates companies to purchase allowances corresponding to their carbon intensity. This initiative is a significant step towards Vietnam's commitment to achieving net-zero emissions by 2050 .

Challenges in Decarbonization

Despite these efforts, the path to decarbonization is fraught with challenges. Industry experts highlight the substantial capital investment required for technological upgrades and the transition to cleaner energy sources. The high cost of green technologies and the limited availability of renewable energy infrastructure pose significant barriers to achieving the desired emission reductions .

Impact of the EU's Carbon Border Adjustment Mechanism

The EU's CBAM, set to be fully operational by 2034, will impose carbon tariffs on imports based on their embedded emissions. Vietnam's steel industry, which exports a significant portion of its production to the EU, faces potential challenges in maintaining competitiveness. The CBAM could lead to increased production costs and reduced market share if emission reduction targets are not met .

Collaborative Efforts for a Sustainable Future

Recognizing the complexities of the green transition, both Hoa Phat and VNSteel are exploring collaborations with international partners to develop and implement advanced decarbonization technologies. These partnerships aim to leverage global expertise and resources to accelerate the adoption of sustainable practices within Vietnam's steel industry.

4. Key Takeaways:

• Vietnam's steel industry is actively pursuing decarbonization strategies to comply with international environmental standards.

• Hoa Phat Group and VNSteel are leading initiatives to reduce carbon emissions, focusing on energy efficiency and renewable energy adoption.

• The EU's CBAM presents both challenges and incentives for Vietnamese steel producers to enhance sustainability efforts.