Vietnam Steel Corp (VNSteel) has re-started the hot rolled steel project with a designed capacity of two million tonnes a year with the cooperation of an Italian equipment supplier, Danieli group. This is being considered good news for investing in the steel industry.
According to Ministry of Industry and Trade, the country's demand for hot rolled steel reaches eight million tonnes a year so the 2 million tonne/year steel mill will only meet 25 percent of the demand after becoming operational. But, putting the mill into operation is not easy.
Previously, the hot rolled steel project was to be set up as a joint venture agreement between India's ESSAR Group and VNSteel and Vietnam Rubber Industry Group in February 2007. However, due to the global economic crisis, ESSAR had to withdraw and VNSteel bought back 65 percent of ESSAR’s shares in the project.
At this time, VNSteel finished to transfer its 19.5 percent stake in the joint venture to Industrielle Beteilingungs SA, a member of Danieli Group. The participation of Danieli Group is very surprising because this is the first time Danieli enters the steel industry as an investor.
When being questioned why Danieli decided to invest in the steel sector of Vietnam when there are many big steel projects of foreign investors, Antonello Mordeglia, vice chair of Danieli Group said, "I am not afraid about the tardiness in investing in Vietnam's steel industry. This is the first hot rolled steel project in Vietnam along with the clear recovery signals of the world's steel market”.
Dau Van Hung, general director of VNSteel also set high expectations on the participation of Danieli in the project because the foreigner has experience and knowledge in the equipments for steel industry. Also Danieli committed to lend $300 million (sourced from European banks) to the project with suitable lending rate and good grace period. "If everything is conducted smoothly, the construction will be kicked off in late 2010 and finished by 2013", Hung added.
In addition, VNSteel expects much in the complex steel projects in cooperation with India's Tata Group.
Within this month, senior officials of Tata Group will work with the leaders of Vietnamese government on the plan of implementing the complex steel project capable of producing 4.5-5 million tonnes a year in Ha Tinh province. Earlier, in May 2007, VNSteel and Tata Steel signed a memorandum of understanding on partnership with total investment capital of $4 billion. But because of a number of reasons, there has been no progress on the project to date.
Another steel project is showing new movements, namely Dung Quat Steel Mill of Taiwan's E-United Group. According to UK based Steel Business Briefing magazine, the work on building the steel furnace with a first phase capacity of 3.5 million tonnes a year will be started in Q2 of 2010, meaning that about 2.5 million tonnes of hot rolled steel and one million tonnes of steel billet will be produced annually. The project had attracted much attention of the investor community because this was one of billion-US dollar steel projects being licensed in 2006. But, the project also has been delayed in last two years due to the economic crisis and changes in relating investment documents.
Recently, Japan's Kobeseiko Group proposed to invest a $1 billion steel billet factory in Nghe An province, showing that foreign investors are eyeing Vietnam's steel industry.
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