Vietnam allows three firms to export unsold iron ore

By Anh Minh   January 29, 2019 | 02:56 pm GMT+7
Vietnam allows three firms to export unsold iron ore
People working on a mine in Vietnam. Photo by Shutterstock

The trade ministry has approved export of 340,000 tons of unsold iron ore produced by VTM, a big loss-making project.

The Ministry of Industry and Trade has approved that three enterprises – Minh Duc Mining JSC, Lan Anh Construction Co., Ltd. and Hoang Lan Trading Co., Ltd. – can export a total of 340,000 tons of limonite iron ore from the Quy Xa mine in northern Lao Cai Province.

The ore was purchased by the three companies from Viet Trung Metallurgy and Mineral Co. (VTM), but there was no demand in the local market and it remained unsold.

In December 2018, the three businesses had proposed that they are allowed to export the unsold ore.

Vietnamese regulations require that iron ore producers must prioritize domestic sales, and in 2012, the Prime Minister prohibited ore exports to prevent depletion of natural resoures and minimize environmental impacts of mining.

However, large amounts of iron ore have remained unsold in the domestic market, leading to enterprises breaking contracts and asking that this ore be exported instead.

The Quy Xa iron mine, along with a steel factory, belongs to the VTM steel project, which is funded by the largest steel manufacturer in Vietnam Vietnam Steel Corporation, and Chinese partners.

VTM, which cost $337.52 million to build, is currently listed among 12 biggest loss-making projects in the industry by the Minister of Industry and Trade after suffering consecutive losses since its launch in June 2014.

The company is estimated to have lost VND650 billion ($28.09 million) in 2015, and as of the end of 2016, total cumulative loss amounted to VND1.18 trillion ($51 million). Initial losses were incurred as a result of high interest rates of up to 20.5 percent a year during the project’s construction.

When operations began, further losses came as a result of low overall domestic demand and having to sell at prices lower than production cost. As a result, the company was constantly in financial difficulties and had no capital to reinvest.

The factory did make its first profit of around VND469 billion ($20.27 million) last year, but many believe that this is unsustainable as it came mostly from export of raw iron ore, a practice not encouraged by the government.  

 
 
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