Steel project waits for Chinese contractor after four-year delay

By Bui Hong Nhung, Bach DuongApril 4, 2016 | 02:30 am PT
A project to expand production at a key steel producer came to a halt after the Chinese contractor withdrew four years ago, and discussions to get it back on track remain ongoing.

Around 10 years ago, Thai Nguyen Iron and Steel Joint Stock Corporation (TISCO) signed a contract with China's Metallurgical Group Corporation (MCC) to build a steel factory with an output of 500,000 tons of steel billet and 500,000 tons of steel bars per year. The total investment was planned at more than VND3.8 trillion ($170 million).


The steel plant is still standing dormant after four years. photo by H.D

The project was first launched in September 2007, but not long after it was delayed due the global economic crisis. In 2009, the project started up again with investment capital projected at VND8.1 trillion ($360 million).

The project returned to a standstill in June 2012 after TISCO encountered capital difficulties, causing the Chinese contractor to withdraw from the project. A document sent by state auditors to the Ministry of of Industry and Trade said at that time 93 percent of machinery and equipment had been paid for MCC, but the contractor had not handed over important equipment like control devices.

Under the contract with MCC, as December 31, 2015, the total investment value of the project was VND4.4 trillion. TISCO said in a new report released on March 29 that it had raised a further VND3.5 trillion for the project .

"However, negotiations with MCC are ongoing, so the project is still in limbo," the report said.

To relaunch the project, TISCO will  have to cover the cost incurred during the four-year delay, hiking up the total cost to as much as VND9 trillion. After adjusting the cost down, TISCO estimated the total cost for expanding the steel plant at VND7.8 trillion.

Thai Nguyen Iron and Steel Joint Stock Corporation is one of the five largest steel producers in Vietnam, with 42.11 percent belonging to the Vietnam Steel Corporation (VSC) and 35.21 percent to the State Capital Investment Corporation (SCIC).

The company made a loss of VND291 billion in 2013, a loss of VND79 billion in 2014 and a profit of VND87 billion in 2015, which came from interest of VND1 trillion contributed by SCIC.

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