Vietnamese steelmakers are hurt by the huge imports of Chinese products, which rose 62% y/y

to 7.7mn tonnes or USD 3.5bn in Jan-Oct 2015, according to Vietnams Customs Department.
Chinese steel accounted for 61% of Vietnams total imports during this period. The average
import price dropped by 25% y/y which resulted in a marginal change in import value. Domestic
manufactures are facing tough competition as global steel prices have fallen sharply while the
local market is flooded with cheap imports, according to the VSA.
2.3

Foreign investment

The steel industry has picked up growth with foreign investors pouring investment into steel
projects, thanks to the gradual recovery of global and local markets along with the
implementation of favourable policies by the Vietnamese government. Vietnam managed to
maintain steady GDP growth at 6% and stable expansion of its domestic steel demand.
According to VSA, Taiwans China Steel raised its 5% stake to 25% in a steel complex under
construction in Vietnam Formosa Ha Tinh Steel (FHS), developed by a Vietnamese arm of
leading Taiwanese chemical company Formosa Plastic Group (FPG) pouring in about USD
940mn more into the project. The initial phase of construction will cost about USD 10bn, with the
facility coming on-stream by end-2015 with an annual crude steel production capacity of about
7mn tonnes. Japans JFE Steel Corporation invested USD 220mn to acquire a 5% stake in FHS
in a bid to expand its global network and provide technical support. Earlier in 2014, JFE Steel
dropped its intention to build its own integrated steel mill in Vietnam due to the global supply
glut. FPG plans to invest further in the second phase to expand the plants capacity to 22.5mn
tonnes per year.
Other investors, such as South Koreas POSCO, have also invested in big steel projects in
Vietnam to tap the potential rising steel demand. Moreover, the Ministry of Finance cited that it
would grant favourable incentives to foreign investors whose projects are located in special
difficult areas. For instance, the investor could enjoy 10% corporate income tax within the first
15 years instead of 25% while its plant employees would enjoy a 50% reduction in personal
income tax. The investor would also enjoy import tax exemption for input materials and
equipment that are not locally produced.
Meanwhile, Thai Nguyen Iron and Steel JSC (TISCO) restarted its second-phase expansion
project with productivity of 500,000 tonnes steel ingot per year, one of the Vietnamese steel
industrys biggest projects, which was put on hold for several years due to capital shortages. It
received nearly VND 1.4tn (USD 62mn) loan from Vietnam Development Bank in early 2015.
The project was approved in 2007 with a total investment of VND 3.8tn, and was scheduled to
be given a test run in 2011. However, problems arising from implementation forced investors to
adjust their investment plans, raising the initial cost to VND 8.1tn. In 2012, the project was
suspended due to lack of finance, after disbursing more than VND 4.5tn.
According to VSA, 42 projects have registered for operations in the 2013-25 period, of which 28
projects may not be feasible because they have failed to follow the regulations set by the steel
industry. Rampant investments in steel projects have triggered competition in the industry in
recent years as supplies of certain steel products such as ingots, construction steel, cold-rolled
sheets, pipes, galvanised steel and colour-coated steel are 1.5-2 times higher than needed.
Competition has forced many firms with weak financial positions and out-of-date technologies to
withdraw from steel projects.

Steel

Vietnam

12

Table 15: Large-scale steel projects in the pipeline in Vietnam

Project
1. Southern Steel
Sheet Co.

Annual design capacity

Location

Start
date

Operating
date

Investment

150,000 tonnes of metallic &

colour coated

Dong Nai

2013

Jun 2015

USD 70mn

Binh Duong

Nov 2013

Nov 2015
(phase 1)
2016-17
(phase 2)

USD 150mn

2. Dong A Sheet JSC

800,000 tonnes of CRC

3. Formosa Ha Tinh
Steel Co. (FHS)
(phase 1)

7mn tonnes of crude steel

(hot-rolling mill, blast furnaces
and steelmaking facility)

Ha Tinh

n/a

mid-2016

USD 10.5bn
(phase 1)

4. TISCO (phase 2)

500,000 tonnes of billets (EAF)

Thai
Nguyen

resume in
2015

n/a

USD 383mn

5. Hoa Sen Group

Binh Dinh Steel Pipe
Plant (2 phrases)

100,000 tonnes steel pipes

Bihn Dihn
Province

n/a

2015
onwards

VND 200bn

6. Hoa Sen Group

(HSG) Nghe Ah Steel
Sheet Plant (3
phases)

100,000 tonnes steel pipes;

100,000 tonnes slitting steel;
100,000 tonnes colour coated;
400,000 tonnes galvanised;
400,000 tonnes cold-rolling

Nghe An
Province

Sep 2014

Aug 2018

VND 2.3bn

Source: Ministry of Trade and Industry

2.4

Steel Industry Development Master Plan

In January 2013, the Vietnamese government approved the Steel Industry Development Master
Plan for 20152020, and spanning to 2025. The main objective of the plan is to satisfy all
domestic demand for steel products as well as to make steel available for export to other
countries.
According to earlier estimates by the Ministry of Trade and Industry, domestic demand for
finished steel aims to reach 16mn tonnes in 2015 and 24mn tonnes in 2020. Meanwhile, the
output of finished steel is expected to reach 13mn tonnes in 2015 and 23mn tonnes by 2020.
The development of the steel industry will be supported by continuous high economic growth in
the country.
Besides fulfilling domestic demand, Vietnam will also export steel products. In terms of all kinds
of steel, the country targets to increase export proportion into 15% of production, while reducing
import volume to 35% of consumption by 2015.
In order to ensure that the planned objectives are met, Vietnam has to invest considerably in the
development of its steel industry. During 20072025, the country will need USD 1012bn for
investment in steel mills, of which USD 8bn will be used in 20072015. Besides, Vietnam will
also need to invest in small- to medium-scale cast iron blast furnaces in northern mountainous
areas, including Lao Cai, Tuyen Quang, Cao Bang, Ha Giang, Yen Bai and Bac Kan provinces,
with total capacity of 1mn tonnes per year.
In 20162025, the industry will focus on producing steel from directly reverted products with the
capacity of 1.5mn tonnes of flat steel ingot or 1.5mn tonnes of hot-rolled steel. It will study the

Steel

Vietnam

13

Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.