India's Tata Steel Ltd. (TISC.BO: Quote, Profile , Research), the world's sixth-largest steel maker, will join forces with state-run Vietnam Steel Corp. (VSC) to build parts of a steel complex with a total $3.5 billion in investment.
Tata will take a stake of up to 65 percent in a steel plant venture with Vietnam and a 30 percent stake in a nearby iron ore mine. Both are part of the complex that Tata will build with VSC, the country's top steel maker.
Tata signed a memorandum of understanding with VSC to conduct a feasibility study by September 2008 on a complex with capacity for 4.5 million tonnes of steel products by 2018.
"The project aims to optimise the resources from Thach Khe iron ore mine in Ha Tinh province to turn out steel products to meet economic demand," VSC Chief Executive Dau Van Hung said.
Hung was referring to the central coastal province of Ha Tinh, 340 km (210 miles) south of Hanoi. The Thach Khe mine is 12 km east of the north-south Highway One, close to the sea.
Its iron ore reserves are estimated at more than 500 million tonnes, which are located deep below sea level, of which around 300 million tonnes would be recoverable, said Pham Chi Cuong, chairman of the Vietnam Steel Association.
"The size of the mine is average, but the ore has a high iron content of more than 60 percent," Cuong told Reuters.
Cuong said the complex would produce steel plate and sheet, which have not been manufactured in Vietnam, one of the world's fastest growing economies but which has to import half its steel product demand, mainly from China.
"The project will serve as the backbone for Vietnam's steel industry during 2015-2020," he said.
Tata Managing Director B. Muthuraman estimated Vietnam's steel product demand at 7 million tonnes a year.
But January to May's imports of steel and billets into Vietnam have already jumped 39.5 percent from a year earlier to 3 million tonnes, government statistics showed.
"The proposed joint venture with Tata Steel for the steel plant shall further strengthen the domestic production of primary steel and lower the dependence of Vietnam on imported billets and slabs," Muthuraman said.
VSC has been running 12 subsidiaries and 14 joint ventures with foreign companies in the industry. It said its total capacity stood at 5 million tonnes of products per year, including the output of its ventures.
In March it secured an investment licence to develop a $527 million hot-rolled steel mill in the southern province of Ba Ria-Vung Tau with India's Essar group and the Vietnam General Rubber group.
Source: Reuters
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