Vietnam’s 10% recycling tax break and 22% EPR target signal ambition, but craft villages, weak demand stall progress

VIETNAM – Vietnam has offered recyclers a 10% corporate tax rate for 15 years and support packages up to VND 20 billion (approximately $800,000), yet its recycling industry remains hobbled by informal collection networks, limited approved scrap grades, and domestic ADC12 demand of only 120,000 tonnes against 700,000 tonnes of processing capacity.

The US-China trade war disrupted global scrap flows, with Chinese buyers redirecting aluminium and copper cargoes through Southeast Asia after tariffs hit 125% in April 2025. But Vietnam’s recycling sector struggles to absorb the opportunity. 

Most domestic scrap originates from over 4,000 unregulated “craft villages,” while the country has only 35 to 54 formally recognised recycling companies. 

Vietnam also imports over 70% of its key steelmaking raw materials, creating import dependency that undercuts the logic of domestic recycling.

The Gap Between Capacity and Consumption

The Vietnam Metal Recycling Forum estimates aluminium scrap processing capacity at 700,000 tonnes annually, but local ADC12 demand is only about 120,000 tonnes per year, a sixth of capacity. 

Chinese exporters, facing weak domestic demand, are aggressively targeting Vietnam, while Japanese cast aluminium alloy imports in Q1 2026 fell to their lowest level for a first quarter since 2013. 

Chinese imports of cast aluminium alloy fell 16.8% year on year in 2025. Without downstream buyers, expanded recycling capacity would produce stockpiles, not profits.

Thailand and the Middle East Pull Ahead

Market participants consider Thailand more attractive for large-scale investment due to its developed recycling industry, stronger manufacturing demand, and mature industrial ecosystem. 

The UAE and Saudi Arabia are investing heavily in ports and scrap-processing infrastructure to become global transshipment hubs over the next decade. 

Vietnam’s restricted scrap grade list intensifies competition for approved materials, with Vietnamese buyers reportedly paying higher prices than Thai consumers despite Thailand’s larger recycling capacity.

When Tax Breaks Aren’t Enough

A 10% tax rate attracts investors. 

A 22% EPR target signals intent. But without formalised collection networks and downstream manufacturing demand, Vietnam’s recycling capacity will remain underutilised. 

The country has entered the global scrap race, but it is running on one leg.

Subscribe to our email newsletters that provide busy executives like you with the latest news insights and trends from Africa and the World. SUBSCRIBE HERE