SCIC told to invest in Thai Nguyen steel project

HANOI – The Government has asked the State Capital Investment Corporation (SCIC) to pour capital in Thai Nguyen steel expansion project’s second phase, and urged banks to restructure debts to ease difficulties for the project owner.

According to the Prime Minister’s instructions, the project invested by Thai Nguyen Iron and Steel Corporation (TISCO) and still remaining uncompleted after seven years will continue to be implemented as proposed by the Ministry of Industry and Trade.

SCIC will have to draw up a capital contribution plan to pour at least VND1 trillion on behalf of the State. Capital contributed will be sourced from the Enterprise Reform Support Fund.

Over the past few years, apart from existing State stakes at some steel enterprises that were previously State-owned enterprises, the State has no longer poured capital in the industry. Vietnam Steel Corporation, the parent company of TISCO, has lagged behind due to the harsh competition in the steel industry from private and foreign-invested enterprises.

The aforementioned project has not been put into operation seven years after its commencement. The project’s investments were initially approved at VND3.84 trillion but have been revised up to VND8.1 trillion.

Some VND4.330 trillion has been disbursed, according to TISCO’s first-half report, but the project has ground to a halt since late last year as banks have stopped lending. This is also the second time in the past seven years the project has deadlocked due to a capital shortage.

As of June 30, 2014, TISCO owed VND7.541 trillion while its equity is only VND1.717 trillion. Due to a lack of capital, the second phase had to be suspended while pending instructions from the Ministry of Industry and Trade and the Government.

While deciding to inject capital so that the investor can finish its project, the Government still requires the industry ministry and the steel corporation to be responsible for the cost-effectiveness of the project and appraise the feasibility of the borrowing plan.

The Thai Nguyen steel expansion plan’s second phase was approved in 2005 to have a capacity of 500,000 tons of steel billet and 500,000 tons of rolled steel, and is one of the projects of Group A to receive preferential loans of the Government.

However, at this moment when the project has fallen far behind schedule, the production capacity of the industry has doubled the demand and many steel plants have to run at less than 50% capacity to avoid inventories.

As a result, the industry ministry has asked the investor to invest in facilities to produce iron and steel billet first. With such an adjustment, only one-fourth of the project is finished while its investments have doubled.