JFE takes step for steel project

A source familiar with the case said the pre-feasibility study had been sent to Quang Ngai Provincial People’s Committee. “JFE will submit the study to the Ministry of Planning and Investment after Tet holidays [late February] and then other relevant authorities for further discussion,” said the source.

The move indicates that JFE continues to pursue this huge project through acquiring stakes of Taiwan-based E-United Group, which secured a site in Quang Ngai’s Dung Quat Economic Zone  (EZ) for the project development, despite the risks that Eiji Hayashida, president and chief executive officer of JFE, said to come from the competition of steel mills in southern China and also in Vietnam.

“JFE is still interested in this project, even the discussion between the investors and state authorities on incentives, land and feasibility is at a bit slow pace,” said the source, adding that JFE, the globe’s sixth largest steel-maker, could acquire from 80-85 per cent stake at the project.

Both JFE and E-United Group are expecting the Vietnamese government would approve the pre-feasibility study and then issue an investment certificate to this integrated steel manufacturing project within this year.

In March 2012, JFE officially announced it had signed a memorandum of understanding with E-United Group for study the feasibility of building and operating an integrated steel factory in Dung Quat EZ. According to the agreement between two steel-makers, JFE will acquire a majority stake in E-United’s  $4.5 billion project as a step expanding its business in tbe Southeast Asia region to meet the increasing demand for steel products in emerging countries.

However, in December 2012 Hayashida said the corporation was not sure if it could beat the competition with other projects built in southern China and Vietnam as well. This concern forced JFE to delay giving final decision to invest in Vietnam.

The source said through the pre-feasibility study, the investors also discuss further about the Vietnamese government’s support to help them enhance competitiveness.

The $4.5 billion steel project is the second largest integrated one in Vietnam, following Formosa Plastics Group’s $10 billion project in central Ha Tinh province’s Vung Ang EZ. The Taiwanese investor is now constructing the first phase of the 250ha, 14-berth Son Duong port, and apartments for workers, office buildings and a 427-room guest house. The firm expects to start commercial operation of this project in 2015.