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One more huge steel project proposed
The Vietnam Shipbuilding Industry Group (Vinashin) and Malaysia’s Lion Diversified Holding Berhard are seeking permission to build a 10mil tonne/year steel complex in the southern province of Ninh Thuan worth $10bil.
The project, backed by the Ninh Thuan People’s Committee, if approved, would be run by Vinashin-Lion Joint Venture Ltd, which has the chartered capital of VND12,480bil, or $780mil. The joint venture would be set up by Maju Stabil Sdn Bhd, a member of Lion Group, and Vinashin.
The steel complex would cover an area of 1,650 ha with a blast-furnace technology steel complex, a 1,450 MW power plant and seaport with the capacity of 50mil tonnes a year.
The huge steel complex would have the capacity of around 4.5mil tonnes of steel a year when it became operational in the first stage in 2008-2010, and 10mil tonnes in the second stage; and be fed by iron ore and coal. Products of the complex would serve domestic demand, especially for shipbuilding industry and exports.
In the dispatch the Ninh Thuan People’s Committee sent to the Prime Minister, it wrote that the steel project is hoped would create a breakthrough in the socio-economic development of the locality.
Too much steel
The news about the project has, once again, sparked concerns about the existence of too many steel mills in Vietnam.
According to the Vietnam Steel Association (VSA), to date, the government has licenced 100% foreign-owned Guang Lian Steel Vietnam in Dung Quat Economic Zone, which has the capacity of 5mil tonnes of raw steel a year; Posco-invested steel mills; a hot rolled steel mill in Ba Ria-Vung Tau province invested in by India’s Essar Group and Vietnamese partners, Vietnam Steel Corporation (VSA) and Vietnam Rubber Corporation (VRC); a Taiwanese 15mil tonnes/ year Formosa-invested steel complex in the central province of Ha Tinh.
It is expected that the Thach Khe Steel Complex in Ha Tinh province invested in by the Vietnam Steel Corporation and India’s Tata Group, which has the planned capacity of 4.5mil tonnes/year, will be licenced in some days.
South Korea’s Posco Group has applied to invest in a steel complex project in Van Phong Bay in the central province of Khanh Hoa. It would inject $5bil to churn out 5mil tonnes of steel a year.
Local media has also reported about a project to be invested in by China’s FRRO China, which has the investment capital of $5bil and expected capacity of 10mil tonnes a year.
Taiwan’s Samoa Qian Ding Group’s project on a 0.72mil tonnes/year plant in Ba Ria-Vung Tau province was licenced in November 2005. However, the investor has not made any further step so far to implement the project.
VSA has warned that if all the steel projects are approved, Vietnam will face serious overproduction in the future.
According to the association, Vietnam needs 10mil tonnes of steel of different kinds by 2010, 15mil tonnes by 2015 and 20mil tonnes by 2020. Meanwhile, four steel projects alone, Formosa’s 7.5mil tonnes/year mill, the 2mil tonnes/year mill of VSC, VRA and Essar, the 3mil tonnes/year Posco-invested mill and the 4.5mil tonnes/year Tata-Vietnam Cement Corporation invested mill, would be able to churn out 15mil tonnes a year by 2015. Meanwhile, operational steel mills can churn out 6mil tonnes a year.
Is the project feasible?
VSA has raised a question about the feasibility of the Vinashin-Lion joint venture’s project. Why is Lion Diversified Holding Behard not planning to set up steel mills in Malaysia, its home country, where there are no big steel mills, while it wants to set up a mill in Vietnam, where there are too many mills already?
According to the Ministry of Industry and Trade, Maju stabil Sdn. Bhd, the partner in the joint venture, was set up on May 24, 2007, and is not known for steel production. Lion Diversified Holding Behard is also not listed among the big steel producers in the world.
Meanwhile, Vinashin is a shipbuilder, which does not have experience in steel and power sectors and has limited financial capability. As such, there is no factor that can guarantee the success and feasibility of such a huge project.
In the latest news, relevant ministries asked Vinashin to prove the feasibility of the project and its capability to make capital contribution to the project. According to the Ninh Thuan People’s Committee, after the request was made, Vinashin decided to lower its capital contribution to 25% from the previously planned 30%.
Prior to that, Vinashin announced it was getting out of the 5mil tonnes/year steel project it planned to cooperate with Posco group on in Van Phong Bay in Khanh Hoa province. The shipbuilder also decided to cancel projects on Hon La port in Quang Binh province and a commercial bank.
VNN
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