Taiwan's largest steel manufacturer and world's ninth-largest steel producer may reconsider investing in Vietnam, as the firm and its Vietnamese partner have failed to agree on the location of a proposed new plant.
With backing totaling US$107 million, China Steel (
Also partners in the deal were Taiwan's Sheng Yu Steel (盛餘) and China Development Industrial Bank (中華開發), holding a 30 percent and 10 percent stake, respectively.
But China Steel and the state-run steelmaker have not been able to see eye-to-eye on the proposed plant's location.
China Steel prefers the Hiep-phuoc Industrial Park, south of Ho Chi Minh City, while the Vietnamese firm prefers the Amata Industrial Park north of city, said Tsao Chien-ming (
"The location of Hiep-phuoc, near a port, is more convenient for transporting steel, but the Vietnamese government prefers the other location because of the lobbying of some local interest groups," Tsao said.
With an annual capacity of 300,000 tons of cold-rolled steel products, the proposed factory is expected to alleviate the oversupply of hot-rolled steel in Taiwan, according to Wang Chung-yu (
Cold-rolled steel is the down-stream product of hot-rolled steel and can be used for computer cases and in small electronic devices, ships, steel structures and cars.
In addition, Vietnam does not produce its own cold-rolled steel and relies on imports.
"The new plant would not only supply steel to the local manufacturers, but also export to other southeast Asian countries and mainland China," Tsao said.
Tsao also noted that those export destinations, especially China, have great unsatisfied demand for steel, and Vietnam is very near China.
Tsao said China Steel may back out of the investment, should the state-run firm decide to withdraw from the project.
"We can enjoy preferential reduced tariffs by setting up the joint venture with the state-run firm," Tsao said. "Without those reduced tariffs, we may reconsider the investment."
Tsao said the state-run firm could become a strong competitor should it decide to build on its own. China Steel should make a final decision by the end of this year.
A steel analyst at a local security house, who declined to be identified, noted that more and more steel manufacturers are setting up factories in Southeast Asia, primarily for two reasons.
"The supply of steel plates is larger than the demand in Taiwan, while the demand and supply situation is the opposite in southeast Asian countries," the analyst said.
Statistics compiled by the Taiwan Steel & Iron Industries Association indicates that China Steel enjoys a 78 percent share of the local hot-rolled steel market and a 48 percent of share of cold-rolled market.
China Steel's sales for the first nine months totaled NT$66.59 billion and pre-tax profits came to NT$10.34 billion. The company has achieved 73.7 percent of its sales forecast and 74.9 percent of its pre-tax profit forecast for this year.
The company's pre-tax profit of NT$1.62 billion in September is the highest monthly total in 1999. Tsao attributed the high figures to the company's increased exports and rising steel prices.
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