OECD Warns Global Steel Overcapacity Crisis Threatens Vietnamese Steelmakers HPG, NKG, HSG

Overview

The OECD has issued a stark warning on global steel overcapacity, noting that Chinese steel exports reached a record 131 million tons in 2025, up 153% from 2020. The report highlights that state-subsidized production, particularly in China, is distorting markets and threatening the profitability of steelmakers worldwide, including Vietnam’s HPG, NKG, and HSG.

Key Facts

• Chinese steel exports hit a record 131 million tons in 2025, exceeding the entire EU’s annual steel output.
• Global steel overcapacity is projected to rise from 640 million tons in 2025 to 745 million tons by 2028.
• Demand growth is forecast at only 34 million tons from 2026-2028, while new capacity additions total 139 million tons.
• China plans to add up to 38.6 million tons of new steel capacity by 2028, the largest planned increase of any country.
• In 2024, Chinese steel firms received subsidies 15 times higher (relative to assets) than producers elsewhere, per OECD.
• Overcapacity could exceed OECD countries’ combined annual steel output by nearly 320 million tons.
• HPG closed at VND 23,950 (-0.83%), HSG at VND 12,100 (-1.22%), and NKG at VND 13,550 (-0.73%) on June 4, 2026.

What Happened

On June 4, 2026, the OECD released a report warning that the global steel industry faces a deepening overcapacity crisis, driven largely by state-supported production in China. OECD Secretary-General Mathias Cormann stated at the OECD Ministerial Council Meeting: “We need to address the root causes, including harmful subsidies and other non-market behaviors.” The report notes that Chinese steel exports have surged to a record 131 million tons in 2025, a 153% increase from 2020, and that global overcapacity is expected to widen significantly through 2028.

The OECD projects that while global steel demand will rise by only 34 million tons between 2026 and 2028, producers plan to add 139 million tons of new capacity. China alone intends to add 38.6 million tons. The report warns that prolonged overcapacity could undermine the long-term profitability and competitiveness of domestic steel industries, increasing reliance on imports for strategically important materials.

Market Context

Vietnamese steel stocks have been under pressure amid global trade tensions and weak domestic demand. On June 4, 2026, HPG (HOSE) fell 0.83% to VND 23,950, HSG (HOSE) dropped 1.22% to VND 12,100, and NKG (HOSE) declined 0.73% to VND 13,550. The OECD warning adds to headwinds from potential anti-dumping measures and slowing construction activity in Vietnam. The steel sector on HOSE has underperformed the VN-Index year-to-date, reflecting margin compression from rising input costs and competitive pressure from Chinese exports.

Strategic Significance

The OECD report underscores a structural challenge for Vietnamese steelmakers: competing against heavily subsidized Chinese producers with massive scale and export capacity. HPG, as the largest integrated steel producer in Vietnam, may face margin erosion in its construction steel and hot-rolled coil segments. NKG and HSG, focused on galvanized and coated steel, are also exposed to export market competition. The long-term risk is that persistent global overcapacity depresses steel prices, limiting pricing power and investment returns for Vietnamese firms. However, potential trade remedies (e.g., anti-dumping duties) and Vietnam’s growing domestic demand could partially offset these pressures.

What to Watch

• Q2 2026 earnings reports from HPG, NKG, and HSG for margin trends and export volumes.
• Any new anti-dumping investigations by Vietnam or other countries against Chinese steel imports.
• OECD’s next steel committee meeting and potential policy recommendations.
• Chinese steel production and export data for the remainder of 2026.
• Vietnam’s infrastructure spending and real estate recovery as domestic demand drivers.