Vietnam’s ministry of industry & trade has urgently asked the government to stop licensing new steel projects to prevent a glut of products on the domestic market.

MoIT proposed that consideration of new steel making facilities would be taken only if they were located in underprivileged regions, including the mountainous areas.

The MoIT’s proposal came in response to public concerns, which grew with rampant issuance of licenses for both domestically and foreign-invested steel projects across the country. The MoIT’s investigation of recently licensed steel projects in Vietnam found that 32 projects were not listed in the country’s steel industry development strategy for 2007-2015, which the Prime Minister Mr Nguyen Tan Dung approved in September 2007.

The licensed steel making facilities outside the strategy are principally located in southern Ba Ria Vung Tau province (seven), northern Hai Phong (five), central Thanh Hoa and northern Hai Duong (four each) and central Ha Tinh (three) provinces.

The MoIT report said that “While steel production is not considered a restricted investment sector, the decentralization move in line with the Investment Law passed in 2005 has led to rampant issuance of new licenses to both domestically and foreign invested steel projects.”

The report added that “When considering licensing steel-making projects, local governments have just referred to the regulations outlined in the Investment Law, which allows local governments to license steel projects of less than VND 1.5 trillion without getting governmental approval. But, local governments have neglected the Construction Law, which requires steel projects to be met with the nation’s steel development strategy.”

The MoIT report underlined that Vietnam was an attractive destination for steel investors at a time when the nation relies on foreign steel imports and the country has advantages to build large-scale steel complexes producing steel for exports.

According to Vietnam’s steel industry development strategy until 2025, the nation’s steel demand was estimated at 12 million tonnes in 2010, between 15 and 18 million tonnes in 2015 and around 20 million tonnes in 2020 a big disparity with the projected output of newly licensed and considered steel projects in the country.