Concrete measures for local steel sector

Low-tech machinery is holding the industry back

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At his meeting last week with steel industry representatives, Hai said it was high time the industry was overhauled so it could ensure production better matched the country’s needs.

In this way, the industry could help Vietnam pare down its trade deficit, he said. Currently the steel industry forks out over $7 billion annually importing over five million tonnes of steel materials and steel products that cannot be produced locally, according to Vietnam Steel Association (VSA).

“The steel industry is largely responsible for the country’s trade deficit, which was $12 billion last year,” said VSA’s chairman Pham Chi Cuong.

The Ministry of Industry and Trade is now in the process of drawing up its plans for Vietnam’s steel product making and distribution system development until 2020 and with a vision to 2030.

Hai said this planning would involve localities having to check all existing steel projects and tighten up their examination of new potential projects.

Cuong said there was no other country in the world like Vietnam where almost every locality wanted to develop steel manufacturing projects even when there was no potential for these projects in those areas.

“Localities hope these projects will help change their economic structure. But these projects are causing big imbalances in steel demand and supply,” Cuong said.

According to VSA, Vietnam has  462 steel making firms, up sixfold against 2000. These firms have total capacity of nine million tonnes, while local demand remains at 6.3 million tonnes.

Over the past two months, the steel industry has seen its stockpiles grow to some 650,000 tonnes because of weak demand. VSA said most firms had an annual capacity of 200,000-300,000 tonnes, which is quite small, and backward technologies were responsible for inefficient energy usage.

Vietnam has no coke, major material to fire steel mills, while there are only two big iron ore mines the 500-million tonne Thach Khe ore mine in central Ha Tinh province and the 120-million tonne mine in northern Lao Cai province.

“After being licensed many projects have no materials. As a result, they had been delayed. Their owners have found ways to transfer them illegally to earn profit. Meanwhile, many localities don’t dare to revoke their licences for fear that their investment picture would be badly affected,” Cuong said.

“Moreover, owners of many foreign-invested projects have no experience in metallurgy. Some projects’ feasibility is being suspected. Thus the government needs to examine them carefully,” he said.

The Taiwanese-Thai joint venture Guang Lian Steel Company’s Quang Ngai province-based $4.5 billion steel manufacturing project, licensed in 2006, is just one project that remains suspect.

One year on from the government’s approval of the investor’s proposal for investment expansion from $3 billion to $4.5 billion, the provincial People’s Committee has yet to grant an amended investment certificate for this project. This is because the local authority wants to see the investor’s financing endorsement from bankers before handing over the necessary paperwork.

Cuong said VSA had been doubtful about this project for long time and believed the delay from 2006 to 2010 was about transferring the project for profit.