China Steel Corp (中鋼), the nation’s only integrated steelmaker, yesterday said the construction of its Vietnamese subsidiary with an annual steel production capacity of 1.2 million tonnes was complete.
The US$1.15 billion China Steel Sumikin Vietnam Joint Stock Co (CSVC, 中鋼住金), a Taiwan-Japan joint venture, will help China Steel expand its market in Vietnam and reach other Southeast Asian countries, company vice president Steve Lee (李慶超) said yesterday.
With a population of 91 million people, average steel consumption per person in Vietnam is less than 100kg, lower than the global average of 200kg, Lee said.
During its trial run last month, the plant produced 10,000 tonnes of steel, Lee said.
The plant is expected to operate at full capacity in 2015, when its four production lines will be able to churn out 500,000 tonnes of cold-rolled sheets and coils, 300,000 tonnes of zinc-galvanized sheets, 200,000 tonnes of electrical sheets and 200,000 tonnes of pickled and oiled steel coils a year, he added.
China Steel said the Vietnamese unit would supply products for the construction and automobile sectors, as well as items used in home appliances.
The plant is expected to generate revenue of between NT$24 billion (US$817 million) and NT$30 billion a year in 2015, and it will take two or three years for it to break even, Lee said.
The plant will be competiting against another plant making cold-rolled sheets and coils built by POSCO, located in the same area as CSVC and with the capacity to produce 1.2 million tonnes of steel a year, Lee said.
“It is better for us to compete with POSCO than allowing POSCO to be the largest steel company in Vietnam,” another vice president, Lin Chung-yi (林中義), said.
“Building a factory in Vietnam can allow us to avoid the tariff of 7.5 percent to 15 percent for shipping products to ASEAN countries,” he said.
The company will also compete with Formosa Plastics Group’s (台塑集團) US$9.5 billion steel venture in Vietnam in three years.
The under-construction Formosa Ha Tinh Steel Corp (台塑河靜鋼鐵興業) is forecast to have an initial annual production of 8.5 million tonnes when it is completed in 2015.
China Steel holds a 51 percent stake in its Vietnamese venture, with Sumitomo Metal Industries Ltd owning a 30 percent stake. Sumitomo Corp, Nippon Steel & Sumikin Bussan Corp and Formosa Ha Tinh each has a 5 percent stake in the venture, while Chun Yuan Steel Industry Co (春源鋼鐵) and Hsin Kuang Steel Co (新光鋼鐵) have 2 percent each.
Separately, China Steel yesterday reported a pretax profit of NT$5.83 billion last quarter, down from NT$6.53 billion the previous quarter.
The company did not provide comparative figure from the previous year.
Lin said the quarter-on-quarter decline was caused by increasing expenditure on annual maintenance for one of its four furnaces last quarter.
The company’s pretax profit last quarter was higher than a year ago as the market sentiment was better this year, he added.
The company posted revenue of NT$87.26 billion last quarter, up from NT$84.7 billion a quarter ago and NT$83.81 billion a year ago.
Lin said the company’s revenue this quarter is likely to rise from last quarter as steel prices increase.