“Most foreign investors who have registered to make investment in super-projects are not big metallurgy names in the world. In many cases, they register the investments to sell later to other investors,” said Pham Chi Cuong, Chairman of the Viet Nam Steel Association.

What do you think about the huge number of 32 unprogrammed-projects?

I think that we only need two steel complexes by 2020, each of which has the capacity of 5-7mil tonnes.

In 2007, the demand for steel reportedly rose by 42%. However, in late 2008, people realised that the figure was just the ‘virtual increase’. In fact, a big volume was imported by speculators which led to the report about the sharp increase in demand, while the steel did not go to construction sites.

Could you, as a senior metallurgy expert and manager, tell us about the real situation of Vietnam’s steel industry?

I can see three problems, the lack of materials, out-of-date technologies and investment scale. The iron ore reserves should be big enough to provide ore for steel mills for 20-30 years at least. However, in fact, a lot of mills do not have enough ore to run for just several years after they became operational.

Local authorities say that lacking ore for steel mills is not a big problem at all, because they can purchase ore on the market, as Vietnam is now exporting several million tonnes of ore to China. However, the measures cannot be applied for the long term. If steel mills do not have enough materials, this is like having no rice to cook after finishing making a pot.

The second worry is about the out-of-date technologies. The domestic projects are mainly small ones using 200 cu m furnaces, while other countries use several thousand cu m furnaces.

The third is small investment scale. I know some enterprises which have small financial capability but are still making investment in several steel projects.

Local authorities and investors should know well about the problems you have said. However, more and more projects have still been licenced, why?

As the government has decentralised the licencing of projects, local authorities have the right to grant licences and offer incentives to investors. Local authorities lack the in-depth knowledge about the field, but they still wish to have steel mills in their localities. The steel mill in Bac Kan province is an example. It has been left idle for the last five years.

Do you mean that the lack of necessary knowledge has led to the breaking of the steel industry development strategy as said by the Ministry of Industry and Trade?

Yes, I do. No other country in the world has so many steel mills which are located everywhere like in Viet Nam. Meanwhile, steel production is a polluting industry and steel mills must be set far from residential quarters. The industry development strategy has been broken, while the massive establishment of steel mills will lead to overproduction. With the fierce competition, steel mills are just operating at 50-60% capacity.

But investors say that they not only aim at the domestic market, but they also plan to export products, isn’t this right?

They say they will export 60-80% of output. However, it is not so easy to export products. China, South Korea, Japan and Taiwan all have their market share. Finally, they have to ‘squeeze’ into Vietnam’s market, a small market which grows by 10-15% only.

Foreign investors have also flocked into Viet Nam in the last two years to build steel mills. What do you think they are seeking in such a small market like Viet Nam?

Most foreign investors who have registered to make investment in super-projects are not big metallurgy names in the world. In many cases, they register the investments to sell later to other investors.

The steel complex project by Tycoon-E.United in Dung Quat economic zone is a typical example. The project was licenced in 2006, and was then a joint venture between Taiwan’s Tycoon and China’s Jinnan. The announced investment capital was over $1bil, and capacity 5mil tonnes.

The overly small investment per tonne of capacity caused doubts about the feasibility of the project. After that, Jinnan withdrew from the project and has been replaced by Taiwan’s E.United.

As such, Tycoon turned out to be an investment broker. Tycoon is just a small business, which is not capable enough in finance and technologies to run a steel complex.

Similarly, the investor of Dung Quat steel project, Sunco, was even smaller. At first, Sunco followed procedures to get licences, and then it re-sold the project to Formosa.

Why do you think foreign investors can so easily speculate steel projects?

Because of the easy conditions in licencing and the confused programming. Licences still have been granted without consulting experts and scientists. (VNN)