21 Januari 2009
New Plant Enters Steel Market (Vietnam)

The Song Hong Steel Plant in the northern province of Phu Tho commenced operations on Saturday, adding one more production facility to an industry already facing overheated growth and the threat of overcapacity.

The new plant, built at a cost of about VND234 billion (US$13.4 million), has a capacity of 180,000 tonnes per year and uses production technologies from Taiwan and Japan.

The plant expects to produce 120,000 tonnes this year, earning VND1.5 trillion ($85.7 million), before increasing to full capacity and earnings of VND2.5 trillion ($142.9 million) in 2012.

The Song Hong Steel Joint Stock Co and the Song Hong Corporation, the two investors of the plant, plan to build two more production lines and a facility to make pig iron.

At the opening ceremony on Saturday, the Song Hong Steel Joint Stock Co signed contracts with Dong A Bank, PetroVietnam Finance and the Bank for Investment and Development of Viet Nam (BIDV) to finance the expansion.

The plant opening follows last year’s warning of overheated development in the steel industry issued by the Viet Nam Steel Association (VSA). In the past two years, a number of major, foreign-invested steel projects have been licensed. Six of these, with a total potential annual output of nearly 35 million tonnes, have been granted licences and are under construction.

If all of these projects, along with facilities being planned and built by domestic investors, are completed on schedule and run at design capacity, it is estimated the industry will churn out a whopping 50 million tonnes of steel annually.

But estimates from the Ministry of Industry and Trade’s Strategic Research Institute put domestic demand for steel at roughly 20 million tonnes by 2020, to rise to about 25 million tonnes under a plan approved by the Prime Minister in 2007.

Therefore, said VSA chairman Pham Chi Cuong, just one or two of the major steel projects currently being developed would be enough to meet expected demand.

Presently, however, Vietnamese steel struggles against Chinese imports due to the higher price of domestic steel. Chinese steel products averages about VND10.9 million per tonne compared to VND13.3-13.5 million per tonne for domestic product, according to the VSA.

(Source: SEAISI Website)

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