Poor projects to go under glass

CA - The Ministry of Industry and Trade last week announced that it would promote the inspection of steel manufacturing projects across the country to ensure the termination of overdue and ineffective ones.

Under a document sent to relevant ministries and localities coded 5775/BCT-CNNg, the ministry's deputy minister Le Duong Quang stressed that based on the reviews of steel projects that had already gained investment certificates, the Ministry of Industry and Trade (MoIT) would ask localities to recall licences of projects that had not operated or could not have operated under their committed schedules without proper reasons. The MoIT, meanwhile, will ask the prime minister to add feasible projects into the national steel development strategy.

The ministry's announcement was made two weeks after the Vietnam Steel Association (VSA) had sent a petition letter to the government and other relevant governmental agencies, expressing worries over the on-paper existence of many huge steel projects, including foreign-invested ones.

In line with the announcement, the MoIT asked local authorities to re-adjust their licencing process of steel projects by seriously considering investors' capabilities in terms of finance, technology, environmental protection and raw material supply.

The MoIT also demanded cities and provinces to temporarily cease licencing normal construction steel projects and timely make an overall review of the licensed ones.

Vietnam currently has a total of 74 steel manufacturing projects, with each having a designed capacity of 100,000 tonnes per year or more. Their accumulative investment capital is nearly $2.3 billion. Those steel projects will be able to produce 2.04 million tonnes of cast iron, 16.3 million tonnes of billets and 35.3 million tonnes of rolled steel per year during 2015-2020.

Among 30 cities and provinces home to licensed steel projects, Ba Ria-Vung Tau province has 15 projects, Hai Phong 9, Phu Tho 4, Ha Tinh 4 and Thai Nguyen, Hai Duong, Danang, Thanh Hoa and Hung Yen have three projects each. Large-scale foreign invested steel projects are located in three central and southern provinces of Ha Tinh, Ba Ria    Vung Tau and Quang Ngai.

The MoIT calculated that by the end of 2009, the domestic steel industry had satisfied 54 percent of local demand for billets, 40 percent for cold rolled steel and almost 100 percent for construction steel. According to the ministry, Vietnam, however, will need around 15 million tonnes of steel in 2015 and 20 million tonnes in 2020.

"If the licensed steel projects are developed smoothly and in line with their schedules, local supplies will surpass demand by 1.5-1.8 times until 2015," said Quang.

According to the VSA, although the central government has continuously given warnings and instructions over licencing of steel projects since last year, localities have still continued isssuing licences for many steel projects, including those manufacturing products that already were being oversupplied in the country.

"This has surely led to unhealthy competition [among investors] to win the market shares. Many steel plants will have to operate at lower capacities, resulting in waste and ineffectiveness," said VSA's chair Pham Chi Cuong.

Local authorities recently criticised Vietnam's three large-scale foreign invested projects hard to develop. They are the Indian Tata Steel's Ha Tinh Steel project in the central Ha Tinh province, the Malaysian Lion Group and local Vinashin's Cana Steel Complex in the central Ninh Thuan province and the Vietnam Steel Corporation's hot rolled steel project in the southern Ba Ria-Vung Tau province.

Meanwhile, other large-scale foreign invested steel projects such as Taiwanese E-United's $3 billion Guang Lian Steel facility in the central Quang Ngai province's Dung Quat Economic Zone and Taiwanese Formosa and Sunsco's $7.9 billion steel and port complex in the central Ha Tinh province are also making unexpectedly slow progress.