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More steel projects kicked off, despite warnings   2009-07-21 - DT

More and more steel projects have been licenced by local authorities though experts have given warnings about the potential consequences of excess steel production capacity.


On July 19, 2009, the 500,000 tonne Thai Trung laminating steel project was officially kicked off in Thai Nguyen after the EPC contract was signed with the contractor Danieli.


The noteworthy thing is that the project is not listed in the overall strategy on steel industry development. The project is also not on the list of the 32 unprogrammed steel projects that the Ministry of Industry and Trade (MOIT) reported to the Government in early 2009.


In January 2009, MOIT sent a report to the government after checking the implementation of the overall strategy on steel industry development for 2007-2015, showing 32 projects which were not listed in the strategy but were still licenced by local authorities.


Of these projects, there were three prominent ones: the one invested in by Formosa Group in Ha Tinh, the one invested in by Lions –Vinashin in Ninh Thuan and China Sumiki Vietnam approved by the Prime Minister. Moreover, there were five other projects which got the okay from the Ministry of Industry and Trade. As such, the other 24 projects are completely unprogrammed, while local authorities still licenced the projects, ignoring the overall strategy and related regulations.


Though experts have warned about the possible excess of steel production capacity, and though steel mills complained about big losses and production stagnation in 2008, the start of Thai Trung project shows that the steel industry is still attractive to investors. The Vietnam Steel Corporation, the state-owned corporation which is considered the backbone of Vietnam’s steel industry, is contributing 30 percent to the project.


Thai Trung is not the only such steel project. A lot of localities and enterprises have reportedly contacted the Ministry of Industry and Trade, requesting that the ministry add their projects to its steel industry development strategy.


Even Dac Nong province, which does not have any advantages in the development of steel projects, including seaport, iron ore or infrastructure, has also requested a 500,000 tonne steel project be added to the list of projects.


A joint-stock company in Ba Ria-Vung Tau province, which is considered as ‘having suffered from indigestion’ with too many steel projects, has also asked concerned agencies to add a new 2 million tonne project to the list of projects.


After the Ministry of Industry and Trade sent a document to local authorities, asking them to declare the names of projects which were licenced but not named in the development strategy, a lot of new projects were mentioned.


One problem is that most of the new projects that localities have mentioned are just ones aiming to make construction steel based on imported ingot steel. Meanwhile, the construction steel capacity of operational steel mills and the mills to become operational in the time to come will reach 7 million tonnes by 2010. Meanwhile, the domestic demand is estimated at just 4 million tonnes, while the possibility of exporting products remains dim.

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