News Room - Steel Industry

Posted on 20 Jan 2009

Plea to stop rampant steel project licensing (Vietnam)

Ministry of Industry and Trade has urgently asked the government to stop licensing new steel projects to prevent a glut of products on the domestic market.

 

The Ministry of Industry and Trade (MoIT) proposed that consideration of new steel-making facilities would be taken only if they were located in underprivileged regions, including the mountainous areas, Central Highlands provinces and they produced what Vietnam now could not make.

 

Meanwhile, both central and local governments have to make bold decisions to revoke licences of any delayed steel projects," asked the MoIT.

 

The MoIT's proposal came in response to public concerns, which grew with rampant issuance of licences for both domestically and foreign-invested steel projects across the country.

 

The MoIT's investigation of recently licensed steel projects in Vietnam found that 32 projects were not listed in the country's steel industry development strategy for 2007-2015, which the prime minister Nguyen Tan Dung approved in September, 2007. Among those, local governments licensed 24 small and medium-scaled steel-making facilities without either prime ministerial or MoIT approval.

 

The licensed steel-making facilities outside the strategy are principally located in southern Ba Ria-Vung Tau province (seven), northern Hai Phong (five), central Thanh Hoa and northern Hai Duong (four each) and central Ha Tinh (three) provinces.

 

"While steel production is not considered a restricted investment sector, the decentralisation move in line with the Investment Law passed in 2005 has led to rampant issuance of new licences to both domestically and foreign invested steel projects," said the MoIT report to Dung.

 

"When considering licensing steel-making projects, local governments have just referred to the regulations outlined in the Investment Law, which allows local governments to licence steel projects of less than 1.5 trillion dong (US$90 million) without getting governmental approval. But, local governments have neglected the Construction Law, which requires steel projects to be met with the nation's steel development strategy," said the report.

 

The MoIT report underlined that Vietnam was an attractive destination for steel investors at a time when the nation relies on foreign steel imports and the country has advantages to build large-scale steel complexes producing steel for exports.

 

Figures indicated that Vietnam's steel imports were around 4.8 million tonnes in 2006, 7.6 million tonnes in 2008, 5.7 million tonnes in 2008 and a forecast five million tonnes in 2009.

 

However, the combined production output of the country's three largest licensed foreign-invested steel projects, which are expected to start operating in next few years would be between 30-40 million tonnes per year, according to MoIT reports.

 

They include Malaysia's Lion Group and state-run Vinashin's US$9.8 billion Ca Na facility in Ninh Thuan province, Formosa Plastics Group and Sunsco's US$7.8 billion Formosa Ha Tinh steel complex in Ha Tinh province and the Taiwanese E-United's US$3 billion facility in Quang Ngai province.

 

Additionally, India's Tata Steel and Japan's JFE Steel were given prime ministerial approval to build steel complexes in Vietnam with around five million tonnes of annum production output each.

 

According to Vietnam's steel industry development strategy until 2025, the nation's steel demand was estimated at 12 million tonnes in 2010, between 15 and 18 million tonnes in 2015 and around 20 million tonnes in 2020 -a big disparity with the projected output of newly licensed and considered steel projects in the country.