Steel glut fears more acute

Chu Chun Fan, representative of Formosa Plastics Group (FPG) in Hanoi, told VIR that the company was studying to raise its project’s annual output capacity project to 22 million tonnes of steel from 15 million tonnes.

“We will not require more land. The capacity adjustment is implemented with appropriately layout of manufacturing facilities inside the current project’s site,” said Fan.

He said the group was not worried about the oversupply of steel, adding that FPG would soon submit its proposal to the Vietnamese government for approval.

FPG gained an investment certificate for the giant seaport and steel manufacturing complex in central Ha Tinh province two years ago. Though FPG broke ground in 2008, the project is still on the paper as site clearance has not finished.

The plan for capacity adjustment was revealed after the group recently sent a document to the government asking for more import and withholding tax exemption incentives that raised doubts over FPG’s financial capacity.

Two months ago Guang Lian Steel, a joint venture between Taiwanese E-united Group and Thailand’s Tycoons Worldwide Group, proposed to raise the output capacity for its project in Dung Quat Economic Zone  from five to seven million tonnes.

Vietnam Steel Association (VSA), in a document sent to the government, opposed the proposal and said it was only a tactic of the developers to further delay the project. The $3 billion complex has yet to come into operation as its construction is prolonged.

VSA chairman Pham Chi Cuong refused to comment on FPG’s plan because the investor has yet to officially submit it to the government.

Fan said FPG would start construction soon once the  entire site was cleared, even if the government did not agree to the group’s proposed incentives.

A Ministry of Industry and Trade official said that  ministries were considering FPG’s incentives, adding that the project could enjoy exemptions for imported coal and iron ore.

“Without government incentives, the project’s development  will be harder. But, we have pump millions of dollars into the project and we will not withdraw,” Fan said.

He revealed that till June 2010, FPG had pumped about $290 million into the project.

Taiwanese media last week reported that China Steel Corp, the largest steel-maker in Taiwan, was in discussion to buy a 10 per cent stake in FPG’s project in Ha Tinh. Discussions between China Steel Corp and FPG could finish at the end this year.

Fan declined to confirm this information.