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Steel Association protests: Proliferating projects pinch profits
Local authorities keep issuing licenses for new steel projects, though they have been warned that Vietnam has too many steel mills already.
In early June, the Vietnam Steel Association (VSA), again petitioned the Prime Minister, complaining that provincial authorities continue to grant licenses for steel projects, even though supply greatly exceeds current demand. VSA argues that too many steel projects may damage the nation’s steel industry development strategy.
VSA asked the Prime Minister to tell local authorities to re-check the investment licenses they have granted recently. If the licensing is found not to have followed regulations, VSA says, local authorities need to correct the fault.
The association also urged that local authorities be told to check that licensed projects have been properly implemented, especially big, foreign-invested projects, and that investors are financially capable of delivering on their commitments. If the investors are slow in implementing projects, their investment licenses ought to be revoked, argues VSA.
VSA thinks local authorities should only grant licenses for projects that will make products which cannot now be made manufactured domestically.
Chairman Pham Chi Cuong of VSA, said that on June 1, Viet Duc Steel Company, which has specialized in making steel pipe, began production at a 350,000 tonne per year mill for structural steel in Vinh Phuc province. Meanwhile, specialty steelmaker Shengling Vietnam also put into operation a structural steel mill in Thai Binh province
“Local authorities keep granting investment licenses to steel projects, even though these are just to produce ordinary steel and do not incorporate any advances in technologies or equipment,” Cuong complained.
These include a $620 million structural steel mill project by Posco SS - Vina which has just gotten a license to operate in Ba Ria-Vung Tau. That province already has 17 steel projects, including seven which are not listed in the steel industry development programme.
Steel projects in Vietnam are abundant and insufficient at the same time. There are plenty of mills turning out structural steel, but the nation still lacks mills that make specialty steel products.
Vietnam still spends a lot to import specialty steel products, and that explains why there’s still a big trade deficit in the steel sector. In the last five months, Vietnam spent $2.17 billion to import steel, an increase of 29 percent in comparison with the same period of 2009. In all of 2009, enterprises spent $6.35 billion to import 12.4 million tonnes of steel of different kinds.
Meanwhile, there’s a glut of structural steel and cold-rolled steel. The total capacity of rolled construction steel has reached 7.83 million tonnes - 48 percent higher than current demand. A lot of steel mills have been running at just 50-60 percent of their designed capacity.
(The Ministry of Trade and Industry earlier this month announced that it is taking steps to curb imports of steel plate and rolled steel - english.vietnamnet.vn/biz/201006/Ministries-take-action-to-curb-trade-deficit-915546)
According to Cuong, a lot of steel mills do not have the conditions they need for sustained development, because they lack materials, electricity and water.
These steel mills have to shut down just after a short time of operation.
Why is it that local authorities keep granting licenses to steel projects, though they have been warned about the overproduction? The answer is competition among provinces to attract investment, especially foreign direct investment.
Management agencies, though threatening to revoke licenses of many projects, are said to have done nothing to prevent the massive licensing.
In mid-2009, the Ninh Thuan People’s Committee threatened to revoke a license it granted to the $9.8 billion Ca Na project of Malaysia’s Lion Group if the investor did not speed up the project implementation. However, the project remains ‘safe’, despite its snail-paced implementation.
Pham Huyen
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