JFE Delays Decision on Steel Plant in Vietnam

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Researched by Industrial Info Resources (Sugar Land, Texas)--JFE Steel Corporation (TSE:5403) (Tokyo, Japan) will delay its decision on whether to build a $3.6 billion integrated steel plant in Vietnam to end of March 2013, as detailed competitive risk assessments are being performed.

JFE Steel announced that it will be studying whether to build an integrated steel plant in Vietnam with E United Group (467) (Taiwan), with the site located in Dung Quat Economic Zone (Quang Nai Province) in March. JFE Steel also said in the statement released in March that it will survey the feasibility of starting operations in 2016, with a capacity for 3.5 million metric tons per year of steel sheets. Plant operations will be conducted and managed by JFE Steel.

Initially, JFE Steel was scheduled to conclude the studies on whether it would be feasible to operate its first overseas steel plant by end of this year. But the company has pushed out its decision for three months, which will be till end of its fiscal year in March 2013.

Currently, talks with the Vietnamese central and local governments to secure infrastructures such as port, water and electricity supply to operate steel plants are continuing, which is another reason for JFE Steel's delay in its decisions.

However, since there are plans lined up to build steel plant in southern China and Southeast Asia, where markets are competitive, JFE Steel will determine whether building a steel plant will be commercially viable operation in a prudent manner.

Recently, Formosa Plastic Corporation (1301) (Taiwan) plans to open its first blast furnace at a Vietnam mill in 2015, in which it invested approximately 820 billion yen ($10 billion). The Chinese government has approved the construction of the steel mill, which can produce 10 million tons per year, in southern China to both Baoshan Iron & Steel Company and Ha Tinh Steel. Both companies are considering exporting to Southeast Asia.

JFE Steel operates eight blast furnaces using iron ore and coal as the key raw materials to make steel in Japan. The company has not built a furnace outside of Japan yet.

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