Vietnamese authorities may terminate $4.5 billion Taiwanese steel project

By Bach Duong   June 7, 2016 | 08:14 am GMT+7
Vietnamese authorities may terminate $4.5 billion Taiwanese steel project
Guang Lian Steel project hasn't been completed after 10 years. Photo by VnExpress

South-central Vietnamese province of Quang Ngai has requested the central government on June 6 to terminate a $4.5 billion Taiwanese steel project.

The final result will be issued on June 30.

This decision came out after investigation by local authorities showed that the Guang Lian steel project has “occupied” the land for 10 years, causing major wastage. The investors of the project have yet agreed to the decision and have publicly opposed the result of the investigation.

Guang Lian received a permit in 2006 and is located in the Dung Quat Economic Zone. It received an investment of $556 million from the Taiwanese Tycoons Corporation.

In 2008, the Tycoons partnered with E-United (Taiwan) and increased the investment capital to $4.5 billion, with production capacity expected at seven million tons.

To support the investors, the Management Board of Dung Quat assigned 337 hectares of cleared land for the project.

On April 2012, two Taiwanese investors invited JFE group (Japan) to collaborate. However, JFE announced to withdraw on September 2014. The investors then asked to reduce the total investment capital down to $2 billion and change the product from technical steel to steel plate.

On July 2015, Guang Lian admitted to Quang Ngai authority that the project was starved of funding. It has ceased working from mid 2014 until present. As of September 2014, the project has only received $42 million. Quang Ngai authority has repeatedly held meetings on the termination of the project since then.

In late 2015, Hoa Phat Group, a domestic company, requested the Quang Ngai authorities to start a new steel project which required the land that Guang Lian managed. Hoa Phat has urged the management board of Dung Quat to definitively settle the land allocation and assets of the Guang Lian steel plant.

The plan to terminate the Taiwanese steel project in Quang Ngai came amid the steel industry, both domestically and internationally, is experiencing excess supply.

Vietnam Steel Association has been "calling for help" as cheap Chinese steel flooded into Vietnam, driving many domestic steel businesses to the brink of bankruptcy. Also, under the free trade agreement between ASEAN and China, in 2018, the import duty on alloy steel will be reduced to zero percent which will further increase the low cost advantage of Chinese steel.

Guang Lian is not the only Taiwanese steel company put under scrutiny in Vietnam. Formosa, a Taiwanese steel conglomerate in Central Vietnam, has been under fire over low productivity and potential involvement in the mass fish deaths along the country's central coastline in April.