Vietnam’s highest industrial management agency has refused a FerroChina proposal to locate a large steel complex downstream of the Cai Mep River in Ba Ria-Vung Tau province. Several months ago, FerroChina proposed a 10 million tonne capacity steel complex with an initial investment capital of $5 billion.
The Ministry of Industry and Trade (MoIT) nixed the project, which had support from the local government, due to overcrowding in the region with existing steel factories, as well as concerns the local infrastructure would not be able to meet demand for power and water.
In addition, MoIT officials said FerroChina’s proposed complex was not listed in Vietnam’s steel industry development strategy until 2015.
The province is home to a dozen domestic and foreign owned steel factories that are either complete or still under construction.
The MoIT suggested that if FerroChina was interested in working in Vietnam, it should seek other locations more suitable with the country’s steel development strategy.
“Upstream steel processing projects and projects to produce import substitutes are still encouraged in line with Vietnam’s existing foreign investment laws,” said Do Huu Hao, MoIT Deputy Minister.
However, the Vietnam Steel Association (VSA) recently asked the central government to limit the licencing of new steel projects due to concerns that Vietnam was becoming overcrowded with large foreign-invested steel manufacturing complexes.
In 2007 alone, VSA said that two large-scale steel complexes with a combined production capacity of eight million tonnes per year began construction, and three others with an estimated supply of 18 million tonnes per year signed investment agreements with Vietnamese companies.
Regardless, Hao admitted that Vietnam would remain reliant on foreign investors to build large-scale steel complexes, which require huge investment capital and advanced technologies.
According to Vietnam’s steel development strategy until 2015, steel demand is estimated to hit 12 million tonnes in 2010 and 16 million tonnes in 2015, while current domestic supply is only expected to meet half demand.
“However, we should not focus on the number of new steel facilities but instead on their quality,” said Hao.
He said that cities and provinces had to be willing to refuse steel projects submitted by any investors with financial handicaps and that they should be prepare to withdraw any seriously delayed projects.