India, Vietnam Plan 4.5 Million-Ton Steel Mill as Global Prices Soar

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Researched by Industrial Info Resources (Sugar Land, Texas)--Domestic Vietnamese steelmakers are feeling the pressure of imports from China at a time when hot-rolled steel prices are set to soar on world markets. The expanding Vietnamese economy should soak up local production as new projects come into operation.

The latest project in the sector is a 4.5 million-ton-per-annum (TPA) mill that will be constructed by India's Tata Steel (Bombay) and the Vietnamese Steel Corporation (VSC). The Indian group will take a final decision on the project in Ha Tinh Province in the central region of the country after the completion of a feasibility study, which is being conducted on the technical, commercial and environmental viability of the scheme. A memorandum of understanding was signed by Tata and VSC this year. VSC is also carrying out a feasibility study.

In a statement Tata, said that both companies firmly believe that the simultaneous development of the domestic primary steel and value-added steel production is fundamental to sustainable growth of the steel industry in Vietnam. No project investment figure was given at this stage.

Tata has indicated that the preliminary research leads it to believe that the project is viable. Tata would hold a 65% stake in the project, which will be phased over 10 years. In addition, it will have a 30% stake in the joint stock company, which will operate a mining project in the Thach Khe iron ore mine. Tata's NatSteel (Singapore) already has a joint venture with VSC.

The Vietnam Steelmakers Association (VSA) has requested domestic steel producers to cut production costs and seek lower-priced sources of ingot steel in order to lower producer prices. VSA has observed that steel imported from China, both ingot and rolled, cost $400 to $409 per ton. The association said there was a paradox in that processing costs on raw ingot in production processes add another $30-$35 per ton that was not reflected in this common price. After a 10% import duty was applied to steel imports in June, Chinese dealers have been offering steel at prices dropped to the equivalent of domestic rolled steel. VSA is approaching the issue of "dumping" with care and would not consider legal action before fully investigating the matter with the trade ministry.

The price of hot-rolled steel for 2008 was forecast in July to be $550 per ton. World Steel Dynamics (WSD) now expects prices to increase to $700 to $800 per ton through 2008. Companies are seeking to offset higher costs and increased freight rates and the higher cost in U.S. dollar terms for countries whose currencies have firmed against the dollar. Currently, Russian mills are delivering to Western Europe at $650 per ton, which WSD believes is already a steel shortage price. If prices stay up in 2008, the industry could react by trimming inventories.

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