Vietnam’s Formosa Set to Double its Steel Production Capacity

In May’2017, Formosa Ha Tinh Steel, Vietnam’s steel conglomerate started operations of its first blast furnace with an annual capacity of 3.5 MnT. Within a year, the company is set to open second blast furnace, doubling its capacity to 7 MnT.

The second blast furnace is expected to become operational in Mar’18 and this will allow company’s plant to produce 5.2 MnT of flat steel, primarily hot-rolled coil and hot-rolled band.

Formosa Ha Tinh Steel is a joint venture between Taiwan’s Formosa Plastics Group, China Steel and Japan’s JFE Holdings which has 5% stake in the venture. According to reports JFE plans to sell the HRC produced in Formosa Ha Tinh Steel under its own brand and will also supply it to its South East Asian processing facilities which are currently using material imported from Japan.

It can be seen from the above graph that Vietnam is a net importer of steel as country’s import stands to be much higher than its export.

According to the Ministry of Industry and Trade, Vietnam’s iron and steel production increased in 2017 but met only 60% of the country’s domestic steel demand.

Although, Vietnamese steel industry could meet its demand for steel billets, construction steel and cold-rolled steel, the country’s manufacturers were unable to meet domestic requirement of hot-rolled steel sheet which is an essential input material to produce cold-rolled steel, galvanized steel and steel pipe. Moreover, HRC is also a vital input for shipbuilding and mechanical engineering sector. Thus, country has to depend upon imports to meet its domestic HRC requirements.

According to Vietnam Customs, the country has to import about 5 MnT of HRC per year from other countries to make cold-rolled steel, steel sheets, and other products with majority imports coming from China.

Vietnam’s economy is growing at a fast pace with country’s forecast of GDP to hit 6.7% for 2018. As there is correlation between economic growth and steel consumption, Vietnam’s steel production is estimated to increase in the coming years. The country has set a target increase its per capita steel consumption from 125kg to 300 kg by 2025.

The Southeast Asian country plans to promote its domestic steel industry in order to reduce its dependence on Chinese steel imports.