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Guang Lian Steel Company wants to raise production capacity at its four-year delayed steel project.
According to a document released by the Government Office last week, Deputy Prime Minister Hoang Trung Hai asked the Ministry of Industry and Trade (MoIT) to clarify financial ability of Guang Lian Steel Company, the investor of the $3 billion steel project in Quang Ngai province’s Dung Quat Economic Zone.
The clarification must be made this month, said the document.
Hai’s direction implies the government still has doubts over the financial ability of the investor despite the MoIT in June sending a document supporting the proposal.
Early this year Guang Lian Steel Company, a joint venture between Thailand’s Tycoons Worldwide Group and Taiwanese E-united Group, proposed to raise the project’s annual production capacity from five to seven million tonnes. The capacity adjustment will also raise total investment capital of the project from $3 billion to $4.5 billion.
However, the investor did not reveal how it would mobilise capital for the project. The Vietnam Steel Association (VSA) pointed out technical designs such as smelting furnaces and electricity transformer stations are not suitable for manufacturing seven million tonnes of steel per year.
“Guang Lian’s unconvincing proposal cannot help but raise questions over its financial ability and its steel production experience,” said VSA chairman Pham Chi Cuong. He said the government’s doubts over the investor’s financial capacity “is essential because the project has been delayed for a long time”.
Previously, the VSA also sent a document to the prime minister opposing the proposal, arguing it was just a delaying tactic.
Guang Lian, firstly invested by Thailand’s Tycoons Worldwide Group and Chinese Jian Steel and Iron Group, was licenced in 2006 with total investment capital of around $1 billion.
One year later, Taiwan’s E-united Group replaced Jian Steel and Iron Group and took a 90 per cent stake in the project, establishing Guang Lian Steel Company. It also raised the investment capital to $3 billion.
Guang Lian Steel Company said it would complete the project’s first stage in mid 2010 and the entire factory would be completed in 2012. However, the project only kicked-off in March.
If the proposal for raising production capacity is approved, the project construction will be finished in 2016, four years later than scheduled.