Ingot steel production booming

Together with the establishment of a lot of steel laminating mills, Vietnam is now witnessing the boom of ingot steel mills, which use blast-furnace technology (using iron ore as the material) with the total capacity of more than 2mil tonnes/year.

According to the Vietnam Steel Association (VSA), the steel consumption level in 2006 reached 7.2mil tonnes, including 4.7mil tonnes of domestically made products, and 3.8mil tonnes of imports. The figure showed that the consumption level per capita was 85kg in 2006, which, according to experts, is nearly equal to the consumption level in the countries with the developed industry, at 100 kg per capita.

Meanwhile, Vietnam’s steel industry is still in the very first period of development with small and medium scale mills. The production of ingot steel, from which finished steel is made, just could provide 1.4mil tonnes in 2006, while flat steel products (plate, sheet) cannot be produced domestically and must be fed by imports. Only in May 2005, did the first mill specializing in making hot rolled steel become operational in Ba Ria – Vung Tau province. The 400,000 tonnes/year mill planned to churn out 300,000 tonnes this year.

The total value of imported steel products was $2bil in 2006. If counting the money spent to import scrap steel and ingot steel for running laminating steel mills, the sum would be $3.158mil. In the first six months of the year alone, Vietnam imported 4.7mil tonnes of ingot steel and scrap steel, worth more than $2.4bil

The growth rate of steel consumption is expected to be not below 20% in 2007, which makes Vietnam a very attractive market for domestic and foreign investors.

A lot of steel projects were announced in the first six months of the year, prompting investors to make investment in ingot steel mills, which will provide ingot steel to laminating steel mills. The investment in ingot steel projects promises attractive profits, especially when the ingot steel prices are very high on the world’s market.

According to VSA, Vietnam has made thorough exploration in two iron ore mines Thach Khe in the central province of Ha Tinh, and Quy Xa in Lao Cai province in the north, and several other small mines. Meanwhile, only the preliminary exploration has been conducted in most of the other mines, which cannot give reliable figures about the iron ore reserves. Investors should thoroughly consider the stable resources of local iron ore before making investment decisions. The material sources must be rich enough to ensure the stable supply of iron for at least 20-30 years, or even 50 years, the average life expectancy of one blast-furnace and one steel complex.

Experts recently have warned about the oversupply of steel capacity. The existing steel laminating mills have the total capacity of 6mil tones a year, or double the demand, while the total capacity of the operational mills producing tube steel has reached 1mil tones/year, double the demand. Meanwhile, the existing mills specializing in metal galvanizing and colouring with 1mil tones/year in capacity are now running at 60% of the designed capacity due to the oversupply.

However, despite the exceeding capacity, all the existing mills are all small ones with low capacity, including the said blast-furnace mills. A laminating steel mill has the capacity at 200-300,000 tonnes a year on average, and only two mills have the capacity of 500,000 tonnes a year for each.

In fact, Vietnamese investors are not powerful enough to build big scale mills which can make the products with high competitiveness, and be environmentaly friendly with newer technologies.

Source: VNE