Hoa Sen Group (HSG) and Hoa Phat Group (HPG), the two steel giants of Vietnam, are racing to build big new steel plants, and big steel complexes, despite concerns about environmental pollution and a possible steel surplus in Vietnam.

On March 1, 2017, HSG broke ground on a steel pipe plant located in Yen Bai Province with an area of 20 hectares. 

Total investment for the plant is VND1.05 trillion ($46 million) with the annual capacity of 220,000 tonnes. 

The main products are iron and steel pipe to serve northern provinces.

The factory in Yen Bai would add significant capacity to HSG’s network of factories. However, HSG is planning a gamechanger in Ninh Thuan. 

Recently. HSG made headlines when it took over Ca Na steel project in Ninh Thuan in August 2016. 

With total investment of $10.6 billion and a capacity of 16 million tonnes per year, this project is expected to be the largest steel plant in Vietnam. 

Its constructions will comprise of five stages from 2017 to 2031; the first one will be put into operation in 2019 with an output of 1.5 million tonnes per year.

Licensed in 2008 with the investment of Lion Group and Vinashin, Ca Na steel project in Ninh Thuan was the biggest FDI project ever licensed in Vietnam at that time. 

The project was constructed from November 2008, however, due to financial difficulties, progress was slow and Lion Group withdrew, leading to long delays of the project.

Consequently, in 2011, Ninh Thuan province revoked the project’s investment certificate before HSG has taken over it.

Besides the steel project in Ninh Thuan, HSG also invested in many steel projects of a smaller scale. In 2016, HSG started building two steel plant in different regions.

The first one was the Hoa Sen Nhon Hoi factory in Nhon Hoi Economic Zone (Binh Dinh). 

The 12.4 hectare project was constructed in January with total investment of about VND2 trillion ($89 million). 

It is expected to be put into operation in June 2017 and the output includes 180,000 tonnes of galvanized steel sheets and zinc-aluminum alloys, 90,000 tonnes of colour-coated steel sheets, and 200,000 tonnes of cold-rolled steel units on an annual basis.

The next steel plant, called Hoa Sen Ha Nam steel factory, was constructed in Kien Khe Industrial Cluster (Ha Nam) since March 2016 and expected to be finished in September 2018. 

The project has a total investment of VND3 trillion ($134.3 million) and annual capacity of over 800,000 tonnes.

HPG joins the race

HPG is also building more plants. After HSG’s steel project was approved, HPG also competes with its rival by taking over the Guang Lian steel plant in Dung Quat Economic Zone (Quang Ngai). 

The project was approved and given the investment certificate from February 2017. The plant is now called Hoa Phat Dung Quat Steel.

HPG’s project has an investment of VND60 trillion (2.6 billion) billion and a capacity of four million tonnes per year. 

The project comprises of two phases and is expected to be completed in four years. The first phase will begin in February and the second will begin in August 2017.

The main products will be construction steel and rolled steel used in manufacturing. 

The factory is hoped to generate $2 billion of revenue annually, contribute about $178.3 million per year to the province’s budget, and create about 8,000 jobs.

The Guang Lian project was licensed about ten years ago, but it was delayed in construction for a long time due to financial difficulties of its Taiwanese investor, E-United Group.

In 2016, HPG also opened its second steel pipe plant in Hoa Khanh Industrial Zone (Da Nang).

Concerns abound

In June 2016, there was a scandal of the mass fish deaths started in Vung Ang, then spread to Quang Binh, Quang Tri, and Thua Thien-Hue provinces. At the end of June 2016, Formosa Ha Tinh assumed responsibility and admitted its violations. 

This scandal has become an expensive lesson and since then localities have grown very wary of steel projects.

Thach Khe mine is an example of the cautiousness of Ha Tinh authorities after Formosa scandal.

The Thach Khe iron mine project received its investment certificate in 2008. In the same year, the feasibility and environmental impact reports were approved. 

In 2011, the project was suspended because the reports were no longer “appropriate to the actual situation.” It was subsequently adjusted. 

The new environmental impact report was approved in 2013. The adjusted scale and investment capital was approved in 2014. 

The technical design is still being evaluated by the Ministry of Industry and Trade (MoIT).

in an October 2016 resolution, the prime minister asked the MoIT to complete all procedures so that the Thach Khe mine project can start in the first quarter of 2017.

But in November, the Ha Tinh authorities requested that the government ask all the related agencies to research the project all over again in all aspects, including the capacity of investors, sources of funding, social and economic impact, technology, market, human resources, and environmental impact.

Due to several concerns over environmental pollution, there are many opposite opinions about this investment decision of HSG, including VinaCapital, one of Vietnam’s largest asset management companies and a shareholder of HSG with 0.5 per cent stake.

Nguyen Hoai Thu, managing director of VinaCapital, raised the concerns about environmental and operating expenditures of HSG with this steel project. 

She also said that VinaCapital may reconsider holding HSG’s share if HSG goes ahead with the project without appropriate environmental protections measures.

Confronted with the opposers, Le Phuoc Vu, chairman of HSG, has promised to protect the environment along with manufacturing steels.

“If my project causes anything similar to what Formosa did, I hereby confirm and guarantee that all my shares and assets at HSG will be transferred to the state,” Vu claimed, as Tuoitrenews reported.

Similarly, HPG affirmed that its steel project in Quang Ngai is environmentally-friendly, as it use the same technology used in its Hai Duong plant.

Besides, many experts also have voiced concerns as there is a global surplus of steel already, and whether Vietnam can compete with steel imports from China. some advised that Vietnam should have invested in other industries that it has a comparative advantage in.

VIR