VietNamNet Bridge reported that Formosa Plastics has just started the construction of the first blast furnace of the steel mill in Vung Ang economic zone. However, industry experts said that they feel worry instead of joy about the project which may bring unforeseen consequences.
The first blast furnace of the steel mill, to have the capacity of 3.5 million tonnes per annum, is expected to become operational by late May 2015. The other two furnaces with the same capacity would be put into operation by May 2016 and May 2017, raising the total capacity of the first phase of the project to 10.5 million tonnes per annum.
The Formosa steel project has the total investment capital of 15 billion dollars which would be carried out in two phases. In the second phase, three more blast furnaces would be built up with the total capacity of 12 million tons a year. This means that the total capacity of the complex would be 22.5 million tonnes.
This amount of 10.5 million tonnes in the first phase would be comprised of 2.7 million tonnes of hot rolled steel and 2.5 million tonnes of raw hot rolled steel. If everything goes as scheduled, the project would provide the products Vietnam is lacking. At present, it has to import 3 million tonnes of hot rolled steel a year.
Besides, Formosa would also churn out structural steel, the kind of products which have been abundant in Vietnam. This means that Formosa would be a big rival to domestic existing steel mills which now can put out 17 million tonnes of finished products and ingot steel.
The oversupply of structural steel might be the reason behind the Japanese JFE Holdings’ decision to reconsider the plan to invest 3.6 billion dollars on a steel mill in Vietnam after realizing that a lot of investors have been flocking to the southern region of China and to Vietnam.