After Formosa Disaster, Steel Gets Reconsidered

4 October 2016

Steel production is not friendly to the environment, said Pham Chi Cuong, chairman of the Vietnam Foundry and Metallurgy Science and Technology Association.

The production of each ton of steel creates around 600 kilograms of solid waste, three cubic meters of toxic sewage, and 2.3 tones of poisonous gas, according to the association.

Arguments continue over the licensing of a US$10.6 billion steel project with an annual capacity of 16 million tones, to be developed by Hoa Sen Group, one of Vietnam’s biggest steelmakers, in the central province of Ninh Thuan.

“There is no steel plant that is clean. Where there’s steel, there’s pollution,” Cuong said, adding that the Formosa scandal was a big lesson, and Vietnam should think very carefully before approving similar projects.

The toxic waste discharged by Formosa’s steel complex has harmed the livelihoods of more than 200,000 people, including 41,000 fishermen. An estimated 70 tones of dead fish washed ashore, along more than 200 kilometers of coastline in the four central provinces affected by the April disaster.

The oversupply in the domestic market is another reason behind complaints leveled against the expansion of steel projects.

Do Duy Thai, general director of Ho Chi Minh City-based construction steel maker Thep Viet, said that oversupply in a sector should not be too large to ensure the stable development of existing enterprises. Therefore, the local authorities should carefully consider the licensing of new steel projects.

According to the Vietnam Steel Association (VSA), the domestic steel output is estimated at 22 million tones a year, with supplies of many products already double that of the local demand.

The country now has an abundant supply of regular products like construction steel, but relies on the import of high-technology products like hot laminated steel that local enterprises do not produce, he said.

However, Formosa’s steel complex, with its annual capacity of seven million tones of steel billets, could meet the local demand for high-technology products after coming back into operation, said Thai.

Formosa’s scheduled opening on June 25 was delayed after the disaster. No new date has been announced.

Local steel producers have not shown an interest in making the product due to large investment requirements, the long time for capital recoup.

Some experts at a recent meeting on the issues said it would be ineffective if Vietnam focuses too much on steel production, because its products now are less competitive than Chinese ones.

Despite having additional tariffs imposed, the price of Chinese steel is still lower than that of local products by 10-15%. As a result, Chinese steel has easily infiltrated Vietnam, as enterprises from China have accepted lower profits to boost exports amid the oversupply in their domestic market.

Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE) said investing heavily in industries such as steel, cement, and oil refining is not the right path for Vietnam now.

“The country has an abundant supply of regular products like construction steel, so it should not expand production of the products, but focus on sectors with modern technology which could bring higher benefits and smaller risks to the environment,” he said. “I don’t think Vietnam should continue investing in steel in the way many other countries did many years ago.”

However, Nguyen Van Sua, vice chairman of the VSA, said it is necessary to study the development of the steel industry. “Steel production and economic development are closely linked. Vietnam should increase its annual steel output, as the country is investing heavily in infrastructure,” he said.

Vietnam’s current per capita consumption of 200 kilograms is far below the world average of 240 kilograms, according to the VSA.


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