VietNamNet Bridge - Formosa could be a “long-term danger for all domestic structural steel manufacturers”, experts have warned.

 

Formosa could be a “long-term danger for all domestic structural steel manufacturers

The first batch of hot rolled coil steel was produced at Formosa’s steel complex in Ha Tinh province on December 24, 2015. This is the first batch of products churned out at the steel mill which is on a trial run, but experts believe that now is the right time for domestic enterprises to be watchful over the ‘Formosa danger’.

First registered with the investment capital of $7.8 billion in 2008, the project’s investment capital was later raised to $9.9 billion and then to $10.5 billion. Since its registration, the project raised big doubts about its feasibility.

Most of hot rolled coil steel used in industrial production and high-quality steel products are imports.

Doubts were raised because only four years after the investment license was granted did the Taiwanese investor kick off the project. This was also because the investor was believed to have no experience in steel manufacturing, while it attempted to run such a large-scale steel complex.

Formosa announced that the steel complex would have the capacity of 7.5 million tons in the first phase of the project, which is 12 times higher than the capacity of the Thai Nguyen Cast Iron & Steel Mill, the biggest one in the north.

Meanwhile, the investor even stated that it plans to raise total investment capital to $26 billion and capacity to 22.5 million tons a year.

Formosa: a danger?

Analysts warned that once Formosa’s first blast-furnace is put into commercial operation, slated for the first half of 2016, it would create stiff competition in the domestic market.

However, a representative of Formosa affirmed that Formosa will not compete with other domestic manufacturers.

He said Formosa would focus on making ingot steel and steel products used in industrial production, including automobile manufacturing, shipbuilding and supporting industries.

Meanwhile, existing steel mills mostly make structural steel.

Formosa’s statement was clarified in a Ministry of Industry and Trade’s report on the impact of Formosa on the steel market last year, saying the products cannot be made by existing mills. 

Most of hot rolled coil steel used in industrial production and high-quality steel products are imports.

The Ministry of Finance late last year lowered the import tariff on the products to zero percent to facilitate enterprises’ import activities.

In its newly released report about the steel market, HSC, a securities company commented Formosa could be the “long term danger for all domestic structural steel manufacturers”.

However, HSC also said the danger would not come within the next few years, because Formosa would focus on making input materials in the first phase of operation and on exports.


DDDN