Steel investment wastes capital

Vietnam Steel Association has once gain sent Official Letter No 62/HHTVN dated June 3, 2010 to the government complaining about the widespread licensing of steel projects with total investment capacity exceeding far the domestic demand.

Factually, Vietnam’s steel industry in the past years developed drastically. In addition, the state still encourages investment in new steel projects, especially the upper projects (producing steel billet from iron ores or scrapped steel) whereas the products Vietnam cannot produce still have to be imported.

But, there are many projects invested in lower sources (importing and rolling steel billet) or the products that the domestic market is facing surplus such as rolled steel, cold steel, steel pipe.

According to latest statistics of Vietnam Steel Association, till March 2010, the production capacity of iron cast and steel mills of Vietnam is in alarming surplus. In details, the designed capacity of coal rolled steel now hits2.5 million tonnes a year against 2009′s produced 481,000 tonnes and that of construction steel mills are designed at 7.83 million tones but the real production output was only four million tonnes, steel billet production plants 5.72 million ones and two million tonnes, representing a surplus of designed capacity of two million tonnes. The quantity excludes the production capacity of projects being implemented.

In line with the steel industry development plan till 2025 with total capacity of 20 million tonnes/year, the number of licensed projects up to now touches over 40 million tonnes/year, a double compared with the projection.

In fact, the licensing of steel mill constructions in provinces/cities is increasing recently.

Ministry of Industry and Trade’s latest inspection results showed that Ba Ria Vung Tau province has 17 registered steel projects totalling 3.75 million tonnes of refined steel a year and over 10 million tonnes of rolled steel/year. The problem is that seven of 17 steel projects do not belong to the plan. Capacity of steel mills here already confronted with the surplus risk.

At present, up 32 steel projects not subject to the projection portfolio obtained the investment certificates, including seven in Ba Ria Vung Tau, five in Hai Phong, four in Thanh Hoa and Hai Duong, three in Ha Tinh. Three of 32 projects are large sized steel complexes gaining the government’s approval, five medium sized ones passed by Ministry of Industry and Trade.

Pursuant to Law on Investment, provincial or city governances have the authority to grant the investment certificates to steel projects Group B and C (capitalised at less than 1.5 trillion dong) without asking the government’s permission. But Law on Construction and Decree No 16/2005/ND-CP guiding the implementation of Construction Law regulate that as for the steel projects Group B outside the plan, investors must obtain the approval in papers of authority agencies before drawing up projects.

Before the tense situation, on March 19, the governmental office issued Official Letter No 1708/VPCP-KTN announcing that deputy Prime Minister Hoang Trung Hai requested the local governances to re-consider the licensing on steel projects. On August 17, 2009, Ministry of Industry and Trade sent the similar warning.

Cong thuong

Tags: Vietnam steel industry, Vietnam steel market