The Vietnam Steel Association has requested the government to revoke licenses of large steel projects that have been delayed for a long time.
Association chairman Pham Chi Cuong said steel projects require huge land areas and opportunities should be given to more capable investors.
Cuong also said local production capacity has far exceeded demand but many new projects continue to be approved.
"It's unreasonable to license foreign invested projects that only produce regular steel products without any new technology and equipment," he said.
"This will lead to a harsh competition and many factories will have to cut back on production despite high designed capacity," Cuong said.
The Ministry of Industry and Trade in August last year asked authorities nationwide to tighten regulations for investment in steel projects but "the situation has not improved since," he said.
Cuong suggested the government approves only projects to make steel products that Vietnam does not produce at present.
According to the Vietnam Steel Association, local demand is only around 5 million tons a year, but annual supply has already reached 7.8 million tons.