Vietnam to stop granting new investment licenses to steel projects

The Ministry of Industry & Trade has asked cities and provinces to stop granting new investment licenses to steel projects and revise existing contracts as domestic steel supplies have outstripped demand.

Statistics from the ministry showed that as many as 30 provinces in the country have steel projects. Of the total, southern Ba Ria Vung Tau Province takes the lead in terms of the number of steel projects with 15, followed by Hai Phong, Phu Tho and Ha Tinh with nine and four respectively. FDI projects account for the majority of steel production in Ha Tinh, Ba Ria Vung Tau and Quang Ngai.

The ministry said Vietnam now had 65 steel projects with a yearly design capacity of more than 100,000 tonnes. In addition, additional projects managed by the Vietnam Steel Corporation account for a total investment of USD 20 million. Of the total, there are seven FDI projects and 58 domestic and JVs.

In 2009, the industry met 54% of the country\'s total demand of steel ingot, 40% of cold steel and 100% of building steel. It is estimated that by 2015 the country will need 15 million tonnes of steel and 20 million tonnes by 2020. This could lead to redundancy as total yearly capacity of the projects will be over 35 million tonnes, between 1.5 and 1.8 times higher than demand.

Mr Le Duong Quang deputy minister at MoIT said that only 23 steel projects had been approved by the Prime Minister in 2007. He added that localities had granted licenses for 32 projects but they had not been approved by the PM, adding that this was not in conformity with Construction and Investment Law regulations.

He added that provinces which have not ensured necessary conditions of scale, technology, input materials, infrastructure and environmental audits could make the projects untenable in the long run and have a negative effect on the environment.

To resolve the issue, the ministry asked the provinces to check the investment situation and production of the industry as planned. It would propose that the PM consider and grant licenses to projects which were eligible for implementation.

It also instructed localities to withdraw investment licenses from projects which are not making progress and have no legitimate reasons for their slow implementation.

The Vietnam Steel Association asked the PM to withdraw licenses of slow projects that would cause waste and affect the capacity of the industry.