HPG Steel Sector Outlook: Short-Term Recovery, Long-Term Oversupply Risks

Overview

Mirae Asset Securities has published an update on Vietnam’s steel sector, noting a short-term price recovery driven by rising input costs and inventory cycles, but warning of long-term oversupply risks as multiple new domestic projects come online. Hoa Phat Group (HPG), the sector leader, benefits from its Dung Quat 2 expansion but faces a challenging export environment due to US Section 232 tariffs and tighter EU quotas.

Key Facts

• Mirae Asset reports that HRC, construction steel, and coated steel prices began recovering more clearly from late Q1 2025.
• Input costs are playing a more important role than demand in shaping short-term prices; raw material prices have risen.
• HRC selling prices are trending up faster than raw material costs, benefiting integrated producers like HPG.
• Coated steel prices are expected to stay around VND 20,000-22,000/kg in 2025.
• US Section 232 steel import tariffs at 25% effectively close the US market to Vietnamese steel.
• EU quotas for Vietnamese steel exports in 2026 are halved compared to 2025, limiting volume growth.
• HPG’s Dung Quat 2 expansion lifted HRC output to 5 million tonnes in 2025; 2026 capacity utilization is forecast to rise from 59% to 73%, yielding 6.3 million tonnes (+25% YoY).
• HPG’s HRC demand is expected to be flat or slightly down, meaning most growth will come from gaining market share from imports.

What Happened

Mirae Asset Securities released a sector update on the steel industry, emphasizing that short-term price recovery is underway but long-term oversupply remains a key risk. The report notes that input costs are currently more influential than demand in setting prices, and that recent price increases have outpaced rises in iron ore and coking coal. Inventory cycles from low-cost purchases in Q4 2025 are supporting margins in H1 2026.

However, the export outlook is weak. US Section 232 tariffs at 25% effectively block Vietnamese steel from the US market, while anti-dumping and countervailing duty cases add further barriers. In the EU, tighter quotas (halved from 2025), higher out-of-quota tariffs, CBAM, and stricter origin rules will limit volume growth despite higher regional HRC prices. HPG is expected to benefit from domestic import substitution as its Dung Quat 2 ramps up.

Market Context

HPG shares closed at VND 28,000 on April 15, 2026, down 1.75% on volume of 27.5 million shares. The stock trades on HOSE. The steel sector has been under pressure from global trade tensions and domestic oversupply concerns. HPG’s valuation reflects its integrated cost advantage and market leadership, but the weak export outlook and rising capacity from new entrants (e.g., Hoa Sen, Nam Kim) create headwinds. The sector is currently pricing in a cyclical trough, with margins supported by inventory gains but long-term structural risks.

Strategic Significance

HPG’s strategy hinges on leveraging its integrated production to capture domestic market share from imports, as export channels remain constrained. The Dung Quat 2 expansion positions HPG to supply the growing domestic demand for HRC, especially from construction and manufacturing. However, the long-term oversupply risk means that HPG’s margin expansion may be capped unless demand accelerates or export markets reopen. The company’s cost advantage and scale provide a buffer, but investors should monitor capacity utilization and pricing power in a potentially saturated market.

What to Watch

• HPG’s Q2 2026 earnings release for margin trends and volume guidance.
• Any changes to US Section 232 tariffs or EU quota negotiations affecting Vietnamese steel.
• Domestic HRC demand data from the Vietnam Steel Association (VSA).
• Capacity utilization rates at Dung Quat 2 and other new steel projects.
• Import volumes of HRC into Vietnam as a proxy for import substitution progress.