Kobe Steel plant to be aborted with Thach Khe ore iron mine

15:42 | 04/05/2018
The billion-dollar steel facility invested by leading Japanese steel maker Kobe Steel may roll with the wind with Thach Khe ore iron mine.
kobe steel plant to be aborted with thach khe ore iron mine
Ha Tinh province has taken a firm stance against mining at Thach Khe

Calling a halt to Thach Khe mine?

Following the Ministry of Planning and Investment, the Ha Tinh People’s Committee expressed resolute opposition to mining operations at Thach Khe, Southeast Asia’s biggest iron ore mine, due to concerns over environmental pollution, high transportation costs, as well as uncertain iron ore sales.

In a recent document submitted to the prime minister, the Ha Tinh People’s Committee outlined the reasoning behind its stance.

Notably, according to the province, transporting ores by road and seaport are both unfeasible. In case transportation was conducted by roadways, unfavourable terrain conditions in collaboration with the high frequency of trips would push up transportation costs.

Besides, existing seaports are not safe enough to facilitate the transportation of ore, and the cost of constructing new seaports is estimated at billions of dollars.

Regarding concerns about iron ores sales, according to the report of the project investor—Thach Khe Iron JSC (TIC)—to date, a number of local firms signed purchase contracts to buy iron ores from the mine. The total contracted ores volume is 5.7 million tonnes per year.

However, only Hoa Phat Group affirmed buying iron ores in the long run, signing up for the million tonnes per year in 2017-2021. However, the group did not make specific commitments for 2022-2027. Therefore, long-term outlook on iron ores sales is uncertain.

Meanwhile, the plan to sell iron ores to the Formosa steel and port complex, also in Ha Tinh, is also not feasible because the Taiwanese group stated that the iron ores exploited from Thach Khe mine does not suit the technology used by the complex.

The province is also concerned about environmental damage, primarily about the disposal of wastewater produced by the exploitation process.

According to the province, the wastewater could include harmful content, such as sulfur and heavy metals. In case the wastewater is not treated thoroughly before being discharged into the rivers and lakes, it would cause serious environmental pollution. However, the construction of a complete wastewater treatment system would be extremely costly.

Previously, decision makers were divided over Thach Khe mine.

Notably, after the fact-finding mission of Minister of Planning and Investment Nguyen Chi Dung, he proposed the prime minister to stop mining operations at Thach Khe, due to concerns over environmental risks.

According to MPI, the project investor (TIC) did not have the required finances despite adjusting investment capital twice in three years. In 2014 the approved investment was VND14.5 trillion ($637.9 million), which was reduced to VND13 trillion ($571.9 million) in 2016 and VND12.2 trillion ($536.7 million) in 2017.

These approved figures still failed to take into account all costs. The lack of long-term outlets was also in question.

In addition, there were concerns about adverse environmental impacts on the surroundings and local lives. The project had not even been approved by the provincial People's Council, the People's Committee, and the National Assembly deputies of Ha Tinh.

MPI’s proposal to stop the mine also received fierce opposition from the Ministry of Industry and Trade (MoIT), Vietnam National Coal-Mineral Industries Holding Corporation Limited (Vinacomin), and especially TIC.

Kobe Steel’s plan falling through?

On March 31, 2010, Kobe Steel received the investment certificate to develop a steel facility in the neighbouring central province of Nghe An, which would produce and market 2.4 million tonnes of iron nuggets per year. Kobe Steel also said production at this plant would use its self-developed next-generation ITmk3® process.

One month later, Kobe Steel signed a $44-million contract to lease 40 hectares of land in Hoang Mai Industrial Park and planned to start construction in July 2010.

At the time, Kobe Steel said it would use iron ores from the Thach Khe mine to manufacture steel despite the fact that the ores in the mine also contains a lot of zinc, which makes it difficult to use in blast furnaces.

The firm believed that the ITmk3® process will enable Vietnam to make effective use of its mineral resources and the use of relatively inexpensive raw materials will help improve the profitability of the project.

However, it is unfortunate for Kobe Steel that during the construction of the steel plant, Thach Khe mine’s operation was suspended due to a conflict over capital contribution between the investors.

Due to concerns that the long delay in exploiting the mine would impact the construction of the steel plant, thus Kobe Steel proposed contributing capital to resume the operation of the mine, which was approved in 2013. However, to date, the capital contribution has yet to be implemented for undisclosed reasons.

Thus, in case the mine is closed, Kobe Steel’s steel facility that may also go into limbo is questionable.

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