Hoa Phat Group accelerates $3 billion ill-fated Dung Quat steel complex

Posted on 05 April 2018

Source: VietNamNet Bridge

Hoa Phat Group is accelerating the construction of the two phases of $3 billion Hoa Phat Dung Quat steel complex in the central province of Quang Ngai's Dung Quat Economic Zone, which the group took over from Taiwanese investors, who failed to develop the project as promised.

Licensed in September 2006, the project was initiated by Taiwanese steel giant Tycoons with a total investment of more than $556 million. The investor committed to completing the construction within 36 months.

E-United Group joined later by acquiring a 90 per cent stake. The two Taiwanese enterprises raised the registered investment amount to $3 billion in 2008 and then $4.5 billion in 2010, while simultaneously increasing the factory’s manufacturing capacity to seven million tonnes per year, five million tonnes higher than the initial design.

In December 2015, the Dung Quat Economic Zone Management Authority carried out an inspection of the project grounds, while simultaneously requesting the investors to voluntarily liquidate its assets.

In March 2016, the two investors committed to restarting the project with the total capital of $2.2 billion and an output of five million tonnes per year. The investors also committed to completing the construction within 42 months. However, after numerous further delays, the local authorities have grown distrustful of the investors as well as the very feasibility of the project.

Since it received the investment certificate to revive this ill-fated project, Hoa Phat Group has completed the negotiations with foreign investors to purchase equipment and has installed the machinery and manufacturing line for the long-rolling steel facility.

According to the plan, the first manufacturing line with the annual capacity of 600,000 tonnes will come into operation in May this year, and the remaining lines will start operation two months later.

The construction of the hot-rolled flat steel facility (the second phase of the complex) was kicked off last year after Hoa Phat completed the sale of shares for the existing shareholders.

The phase is expected to generate two million tonnes of hot-rolled flat steel products per year, making Hoa Phat the second hot-rolled flat steel maker in the country, following Formosa. According to the plan, half of the products from the facility will be used by Hoa Phat’s steel sheet manufacturing plant, and the other half will be distributed in the domestic market.

According to Tran Tuan Duong, general director of Hoa Phat Group, 60 per cent of construction steel manufactured by domestic plants is distributed in the northern market, while only 10 per cent reaches the central and southern markets.

Thus, once the Hoa Phat Dung Quat steel complex comes into operation, one fourth of its products will be exported and the remaining part will be distributed at the central and southern markets.

Duong added that as demand for high-quality steel to manufacture screws and bolts is increasing, Hoa Phat Group plans to distribute two third of its high-quality steel in the domestic market.

According to Hoa Phat, despite the fact that its existing steel manufacturing plants exceed their designed capacity, its products have yet to satisfy the market demand. Hoa Phat is confident that with the increasing domestic demand for steel, it will not be difficult to sell all the products manufactured by the Hoa Phat Dung Quat steel complex.

Speaking at the corporation’s annual general shareholders’ meeting on March 22, 2018, Duong stated that the upcoming Hoa Phat Dung Quat steel complex is not inferior to Formosa’s and will not lose the competition.

“The investment rate of Dung Quat project is only one third of Formosa,” he added.

Notably, it takes Formosa $1,700 of expenditure to manufacture one tonne of products, while the figure for Hoa Phat Dung Quat steel complex is only $500. 

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