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Vinacomin, in a statement released two weeks ago to explain the demise of Ke Ga port project in Binh Thuan, which was expected to support aluminium exports, acknowledged the performance of the Tan Rai bauxite-alumina plant in Lam Dong province had been below initial expectations.
“Key factors leading to the poor effectiveness of this project are increased total investment capital, input materials prices and especially the current drop of aluminium price which is now below $340 per tonne,” the group said.
Vinacomin released the statement after Prime Minister Nguyen Tan Dung ordered a halt to the construction of Ke Ga port, prompting many economists and experts to raise question on the effectiveness of bauxite-alumina projects in the Central Highlands, as well as pollution concerns.
Tan Rai is the first bauxite-alumina project ever constructed in Vietnam and touted as critical to the development of bauxite-alumina resources. According to Vinacomin, Tan Rai plant has total annual production capacity of 650,000 tonnes of aluminium.
The project started construction in 2008 with total investment capital of around $700 million.
Vinacomin announced the plant would start commercial operations in the second quarter this year, after failing to meet the completion deadline two times in 2011 and 2012.
Last December, Vinacomin received a 13-year, $300 million loan from a group of foreign banks to finance the project. The banks include Citibank, Mizuho Corporate Bank, Sumitomo Mitsui Trust Bank, Limited and Bank of Tokyo-Mitsubishi UFJ.
Yumoto Yohei, head of Citibank Japan Export Finance, said the transaction would enable a stable supply of alumina to Japan for Marubeni, a Japanese trading firm whose overseas smelters would now secure long-term supply from the Lam Dong based-plant.
To ensure the effectiveness, Vinacomin said it would propose the government some incentive policy for the project.
The group expects aluminium prices would rebound in line with the recovery of the global economy and affirmed it kept on building the second plant in Dak Nong province to be completed this year and start production in mid-2014.
“Stopping construction of Nhan Co project in this context is not appropriate to reality,” Vinacomin stated.
Government Office Minister Vu Duc Dam said the government still wanted to develop the aluminium industry in Vietnam, affirming that Vinacomin would continue building and running the Nhan Co and Tan Rai projects.