The European Union's Carbon Border Adjustment Mechanism: A New Era for Vietnam's Steel Industry

Strategic Insights -

Vietnam's open, export-dependent economy faces a significant challenge with the introduction of the European Union's Carbon Border Adjustment Mechanism (CBAM), a policy tool designed to prevent 'carbon leakage.' The steel industry, one of the four primary sectors most affected by CBAM, requires a proactive response to adapt to the new regulations and maintain competitiveness. Despite the challenges, CBAM presents opportunities for Vietnam's steel industry to accelerate its greening and achieve sustainable development.

Key Takeaways:

  • The European Union's Carbon Border Adjustment Mechanism (CBAM) is a policy tool that imposes a carbon fee on goods imported into the EU based on the carbon emissions generated during their production, aiming to prevent 'carbon leakage.'
  • Vietnam's steel industry has experienced remarkable growth, establishing the nation as one of the leading steel producers and exporters in the region, with large-scale production and capacity, and a diverse range of products.
  • In 2024, Vietnam achieved significant results in steel exports, with a total of approximately 12.62 million tonnes of steel exported, valued at US$9.08 billion, representing a 13.47% increase in volume and an 8.78% increase in value compared to the same period in 2023.
  • However, the industry's recovery remains slow, and the sector saw a decline in exports in the first quarter of 2025, mainly due to the rise of global trade protectionism.
  • The primary cause of the decline in steel exports is the rise of global trade protectionism, including the United States expanding the scope of its Section 232 tariffs, the EU tightening trade defense measures, and India implementing safeguard measures on galvanised and cold-rolled steel.
  • The Vietnamese steel industry faces significant challenges, including the high carbon content in the steel production process due to the use of outdated and energy-intensive technology, which generates significant carbon emissions.
  • The absence of a precise and transparent system for monitoring and reporting carbon emissions also presents a major challenge.
  • Despite these challenges, CBAM presents opportunities for Vietnam's steel industry to accelerate its greening, improve energy efficiency, and reduce emissions.
  • Producing "green" steel will enhance product value and create a competitive advantage, meeting the growing demand in the EU and global markets for environmentally friendly products.
  • The pressure to reduce emissions will extend throughout the entire supply chain, requiring cooperation and transformation from raw material suppliers.
  • Global market instability and fluctuations in raw material prices pose significant risks to the steel industry.

Statistics:

  • 12.62 million tonnes of steel were exported by Vietnam in 2024, valued at US$9.08 billion.
  • The steel industry in Vietnam achieved a 13.47% increase in volume and an 8.78% increase in value compared to the same period in 2023.
  • The steel sector saw a decline of 18.83% in exports in the first quarter of 2025 compared to the same period in 2024.
  • The rise of global trade protectionism is the primary cause of the decline in steel exports.
  • The Vietnamese steel industry relies heavily on outdated and energy-intensive technology, generating significant carbon emissions.

Sources:

  • [Source: European Union's Carbon Border Adjustment Mechanism (CBAM) policy tool]
  • [Source: Vietnam's steel industry statistics (2024)]
  • [Source: Global steel market trends and statistics]
  • [Source: Vietnamese government's commitment to achieving net-zero emissions by 2050]
  • [Source: Vietnamese government's policies and regulations on carbon pricing and greenhouse gas emissions]

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