Steel strategy aims to upgrade technology, not defend obsolete mills

The steel industry association has been warning that the nation already has too many steel mills, and the Government has put the brakes on some new mills. However, even though investors have been slow to implement approved projects, no licenses have yet been yanked. VietNamNet interviewed a high Industry & Trade Ministry official to find out why.

Sixteen months ago, Deputy Prime Minister Hoang Trung Hai instructed cities and provinces and the Ministry of Planning and Investment to stop granting licenses to projects for manufacture of ordinary structural steel. Hai also told local authorities to check licensed projects and revoke investment licenses from the projects which have been slow in implementation.

Though no license has yet been revoked, it now looks as though Ninh Thuan province will cancel the huge Ca Na project. “Granting and revoking licences is a prerogative of local jurisdictions,” explains Bui Quang Chuyen, Deputy Director of the Heavy Industry Department (MOIT). “We can only advise them.”

VietNamNet: The Government told local authorities to stop granting license to the steel projects that make ordinary structural steel. Why have more steel projects still been licensed?

Bui Quang Chuyen: There are only two such cases. The first is the Shengli steel mill in Thai Binh province. In the first phase of the project, the investor built a mill to make 600,000 ton of steel ingots annually. All along, it was understood that the feasibility of the investment depended on completion of a second phase, in which the investor would convert ingots into structural steel, up to 200,000 tonnes per annum.

When Shengli began implementing Phase II in late 2009, some argued that it was defying the Government’s order to refuse any further structural steel projects. However, the second phase had already been foreseen in the original investment license.

The second case involves a mill built by Viet Duc Steel Company in VInh Phuc Province which went into operation in April. We are looking into this case.

VietNamNet: What’s the situation with respect to revoking licenses of moribund projects?

Chuyen: Local authorities have been checking the status of approved projects. Recently, the Ba Ria –Vung Tau Industrial Zone Management Board transferred the investment certificate of the Essar hot rolled coil steel (HRC) project to the Vietnam Steel Corporation (VSC).

Decisions are pending in other provinces where, mainly as a consequence of the global recession, investors have failed to implement projects.

We’ve discovered that coordination between the ministry and local authorities has not been satisfactory. Provinces have been slow to report problems or have sent misleading reports.

VietNamNet: In its latest update, your ministry mentioned three big projects that may not be implemented, including the Ca Na project and the projects under development by invested by two Indian corporations, Tata and Essar. Can you tell us more?

Chuyen: Ninh Thuan province has decided that the $9.8 billion Ca Na project will not be implemented. Its Malaysian promoters proved not to have the financial ability to carry out the work.

As for Tata Group’s $5 billion steel mill project in Ha Tinh, we still support it. Tata is India’s largest corporation and one of the ten biggest steel makers in the world. They still wish to develop the project. The Prime Minister has tasked the Ha Tinh provincial authorities to work out a way to go forward with Tata and VSC, its partner in the joint venture.

We also want the two million ton per annum HRC steel project in Ba Ria – Vung Tau to be implemented. Though Essar’s backed out, we support that project because Vietnam still must import HRC. Its implementation of the project depends on VSC’s arranging financing.

VietNamNet: Why should we worry if there are many steel projects not listed in the steel industry development strategy?

Chuyen: We want to avoid more projects using obsolete technology. Every new steel project increases demand for electricity, which is already in short supply. An ingot steel mill consumes 500 to 700 kWh to make one ton of ingot steel. Further, we already have plenty of mills that make structural steel. Besides, the existence of the steel mills that make normal construction steel will cause overproduction and cause waste in investment.

VietNamNet: It’s said that MOIT will propose that the Government add more steel projects into the steel industry development strategy. Will that lead local authorities to license more steel projects?

Chuyen: The steel industry development strategy is open-ended and, in my view, already 90 percent successful. We are going to be putting more emphasis on assuring that developers have good financial strength and will get right to work. We need projects which use modern technologies and make products that Vietnam currently must import. We need to pay attention to project efficiency, not worry if there are too many steel projects or if current, obsolete facilities cannot compete.

Tags: Vietnam steel industry, Vietnam steel market