Vinashin finds little room to manoeuvre

The government’s knock-back was made after collecting opinions from the ministries of Industry

Once flagship Vinashin is undergoing major restructuring

and Trade (MoIT), Finance (MoF), Planning and Investment (MPI), Construction, Transportation and Natural Resources and Environment and Vietnam Steel Association (VSA).

The decision came a year after Vinashin proposed in November, 2009 to raise the capacity of its Cai Lan Industrial Park-based hot rolled steel plant to a million tonnes a year from 350,000 tonnes.

Deputy Prime Minister Hoang Trung Hai said the government would not approve its demands during the implementation of the national master steel development plan for 2007-2015, with a vision to 2025.

MoIT data shows that Vietnam’s steel supply will surpass demand by 1.5-1.8 times until 2015, particularly building steel. However, hot rolled steel supplies in Vietnam are still in short supply.

The problem with Vinashin was that it did not have sufficient experience and capital ability to run such a big steel project effectively.

According to the MPI, capital shortages were the biggest hindrance for Vinashin to triple the plant’s capacity, which it said would help supply Vietnam’s ship building industry.

The MPI told the government it was unfeasible for the group to mobilise sufficient funds to expand the plant’s capacity.

Vinashin projected it needed VND3,000 billion ($142.8 million) for the plan. The group anticipated that shipbuilders in Vietnam would need up to two million tonnes of steel plates in 2011, almost double domestic millers’ manufacturing capacity. The group reported it had to import around 500,000 tonnes of steel plates for shipbuilding last year.

The VSA also opposed Vinashin’s plan, arguing that Vinashin was not specialised in steel milling.

It took more than eight years for the state group to commission the Cai Lan project, which opened in mid 2010.

Vinashin has yet to operate another 200,000 tonne steel plant in northern mountainous Yen Bai province, built in early 2007, and it  is operating a 300,000 steel project in northern Haiphong city.

Vinashin is currently undergoing major restructuring after serious financial mismanagement was detected in July, 2009.  The firm is reported to have strayed outside its core business and have too many poorly run subsidiary companies on its books.

The MoF reported that Vinashin’s liabilities amounted to more than VND86 trillion ($4.4 billion) and its assets VND104 trillion ($5.3 billion).