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Steel mills lust for iron ore; mining provinces have the whip hand   2009-10-15 - TBKTVN

Vietnam’s steel industry has grown rapidly in recent years, but its continued growth is problematic unless steel mills can find stable supplies of iron ore in Vietnam’s mountain provinces in lieu of relying on imported, expensive scrap.

 

 
According to the Ministry of Industry and Trade, the capacity of Vietnam’s steel rolling mills is now nearly double the nation’s capacity to refine iron ore into steel ingots. Moreover, 80 percent of the ingot steel output is made from scrap steel. As Vietnam has been relying on imports to feed its furnaces, the prices of steel products has been fluctuating in accordance with the world’s prices.

 

Trying hard to get stable supplies of ore

 

According to the Vietnam Steel Association (VSA) in 2009, Vietnam is 60 percent self-sufficient in ingot steel.  It can produce 2.6 million tonnes of ingot steel annually and must import 2.2 million tonnes more. 

 

Domestic enterprises would prefer not to have to import scrap steel to produce ingots in Vietnam.  Nguyen Tien Nghi, Deputy Chairman of VSA, said that it would be more profitable to make ingot steel from domestic iron ore than from scrap steel. That explains why many investors have undertaken to produce ingot steel from iron mined and refined in Vietnam.

 

Thai Nguyen Cast Iron and Steel Corporation (Tisco) has put the first phase of an ingot steel project into operation.  It can produce 230,000 tons of pig iron from 400,000 tons  of iron ore a year. Tisco now feels satisfied with the iron ore provided by Trai Cau mines in Thai Nguyen and Nguom Chang in Cao Bang province. In its second phase, when the mill will need one million tonnes of ore annually, Tisco will also use iron from Tien Bo mine in Thai Nguyen.

 

However, proven iron ore reserves in Thai Nguyen province are running out (it is estimated that there remain some 38-40 million tonnes of ore in the province). Tisco is now exploiting Tien Bo mine, which has the reserves of 24 million tonnes, and the mines in Trai Cau area with the total reserves of 3.5 million tonnes. The reserves are just enough to supply ore to Tisco and the Gia Sang Metals Company.

 

Meanwhile, a Hai Phong steelmaker, the Van Loi Steel Co. is still looking for an iron ore source for a mill it will start up by the end of 2009.  Hoa Phat Steel Corporation, also in Hai Phong, is also meeting big difficulties because it cannot control its iron ore supply. In Quang Ninh Province, the new Dong A Cast Iron and Steel Mill (designed capacity 300,000 tonnes per annum) has been forced to shut down one furnace after just a month of running, for lack of materials.

 

The vicious circle

 

Under the current regulations, investors proposing new steel projects must show government agencies that the projects can expect a stable material supply. For example, steelmaking plants must show stable iron supply sufficient for 15 years at least. As for the projects on steel mills using scrap steel, investors have to prove the stable supply sources of scrap steel, either from domestic sources or imports.

 

In order to have stable iron ore supply to run steelmaking plants, investors have to win local authorities’ permission to develop iron ore mines.  Here’s their problem: the local authorities insist that the ore be smelted within their province boundaries.  Their objective is the development of local industries. However, many enterprises are reluctant to build mills in these localities because there are a lot of disadvantages, starting with poor infrastructure conditions.

 

Cao Bang province, for example, has 20 iron ore mines and reserves estimated at 60 million tonnes of ore. Therefore, the provincial authorities have been put priority on exploitation and mineral processing in their 2006-2010 socio-economic development plan.

 

Twelve projects have been proposed to developers. Some, for structural steel, aim at annual capacity of 500,000 tons.  Other much smaller project proposals are for production of specialty alloys.

 

An investor comments that because the province will not allow the export of iron ore, his company has no alternative to smelting in Cao Bang even though the infrastructure is problematic. 



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