As a lot of projects on ingot steel mills will become operational in the near future, worry has been raised about whether or not there will be enough iron ore to run the ingot steel mills.
Someone may say that this is not the biggest worry as ingot steel mills can collect iron ore on the domestic market. Currently, Vietnam exports 2mil tonnes of iron ore every year to China. However, the problem is that blast furnace ingot steel mills cannot use low-quality ore. Therefore, the ore the mills can purchase on the market would not be able to satisfy the demand of the mills in terms of quality.
In the last few years, due to mismanagement, several iron ore mines have been open for people to exploit spontaneously. This has created the illusion that Vietnam is very rich in iron ore, and that the iron ore reserve is enough for many mills. In fact, several blast furnaces in Thai Nguyen and Bac Kan in the north which have been built recently have had to halt production for some time due to lack of ore.
The Thai Nguyen Cast Iron and Steel Company, when deciding to make investment in the Nguom Trang iron ore mine in Cao Bang, made an investigation of the mine’s reserve and found out that the real reserve was just equal to ½ of that in previous reports.
Of course, steel mills have another choice: run the blast furnaces with imported ore. However, a question might be raised: where will the imported ore come from? The countries which export ore, including Australia, Brazil and India, are very far from Vietnam. In order to import ore at low prices, Vietnam needs to have big ships, and deep water ports capable of receiving big ships of more than 70,000 tonnes. Moreover, Vietnam also needs to have specialised ports for importing iron ore, a product that can create dust.
Vietnam does not have fat coal to make coke coal for metallurgical complexes. There is a small mine of fat coal in the Thai Nguyen Complex but Vietnam still has to import coke coal from China. The blast furnaces to be built in the near future will have to consume coke coal imports, a thing that is worth considering when making investment decisions.
It would be a big problem to import more coke coal from China as the country has been trying to limit exports of coke coal due to environmental problems. Vietnamese enterprises must get approval from the Government of China to import up-to-standard product. The approval is not required to import product made in Chinese localities, but the product always has problems in quality.
Experts said that except the projects invested in by joint ventures or 100% foreign owned enterprises, which use modern technologies, other investors tend to use backward Chinese technologies that even Chinese mills do not use any more. The strategy on steel industry development by the Chinese Government stipulates that backward technologies and small-scale steel mills are not allowed in China. The country well understands that backward equipment will consume more coal, power and water, which make the products uncompetitive.
Source: VNE
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