Steel projects bent out of shape by land woes

The steel industry fears projects will flood the market

Investors in China Steel Sumikin Vietnam’s (CSVC) $1.15 billion project in southern Ba Ria-Vung Tau province have not started construction of the steel mill nearly two years after receiving an investment certificate.

The investors include the Taiwan-based China Steel Corporation, which holds a 51 per cent stake in CSVC, Japan-based Sumitomo Metal (30 per cent), Sumitomo Corporation (5 per cent), Sumikin Bussan (5 per cent) and the Vietnam-based Formosa Ha Tinh (5 per cent).

They got the investment certificate from the Ba Ria-Vung Tau Industrial Zone Management Board in May, 2009 for a 1.6 million metric tonne steel plant in the My Xuan A2 Industrial Park, which includes 400,000 tonnes of hot-rolled plates, 200,000 tonnes of pickled and oiled steel, 500,000 tonnes of cold-rolled coils, 300,000 tonnes of hot-dip galvanised and 200,000 tonnes of electrical sheets.

The investors originally planned to start construction of the steel mill in August, 2010. The plant is scheduled for commercial operation in December, 2012.

“There have remained difficulties in site clearance and compensation works. We have proposed to the Tan Thanh People’s Committee to implement clearance,” said Tran Huu Thong, deputy head of the management board.

Thong, however, admitted that clearance would be difficult to carry out in the next several months, particularly before the election of People’s Councils in localities in mid May this year.

About 80 per cent of the 109 hectares required for the steel mill has been cleared.

“However, it currently looks like a panther’s skin, which is not a seamless strip of land,” Thong said.

Local authorities originally targeted to complete site clearance by September, 2010.

Stagnation in site clearance and compensation works is also the major hindrance for India-based Tata Steel to receive an investment certificate for its $5 billion integrated steel project in Vung Ang Economic Zone (VAEZ) in central Ha Tinh province.  Tata Steel has twice asked for the investment certificate, with the second time in December, 2009.

According to VAEZ’s head Ho Anh Tuan, it would need some VND4,500-5,000 billion ($217-241 million) for site clearance, compensation and resettlement for local residents affected by the project, which covers more than 700ha. Under VAEZ’s current policy, investors will have to pay upfront for those clearance, compensation and resettlement, which will be then deducted in land rent fee and other taxes after their projects come into operation.

The Indian investor and the VAEZ’s authorities have however not yet reached any consensus about the payment methods so far.