Tata Steel's Vietnam plant loses out in priority

South East Asian country allots land to larger project of Taiwan firm.

Tata Steel’s $5 billion project in Vietnam has lost the land it was promised to a larger project of a Taiwanese company, making it vulnerable to further delays. The Vietnamese government has promised another land lot near the earlier location, but the allocation is yet to be done. The company, the world’s sixth largest steel-maker, expects the new land will be allotted in a few weeks.

The 4.5 million tonne (mt) project, announced two years earlier after signing an agreement with Vietnamese partners, has already been delayed on land allocation issues, said sources in the know. Recently, Tata Steel said commissioning of the first phase would be complete in 2011.

The project of Formosa, the Taiwanese company, is larger in scale than that of Tata Steel. Their 15 mt plant would require an investment of $7.9 billion and the steel complex is planned to cover an area of 3,035 hectares, the Vietnamese media reported.

A Tata Steel spokesperson confirmed the “change in plant location”. He said a new location has been identified and the allocation would be completed in a few weeks.

In 2007, the Indian steel-maker had entered into a joint venture with Vietnam Steel Corporation and Vietnam Cement Industries for building the integrated steel mill at Ha Tinh province. Tata Steel holds 65 per cent interest in the project. The joint venture agreement also entitles the company to hold a 30 per cent equity stake in the Thach Khe iron ore mine.

According to the approved plans, the complex is to be developed in the Vung Ang Economic Zone. Tata Steel requires 1,100 hectares of land for its $5 billion project. However, the zone management wrote a letter to the Tata Group, saying it could provide only 725 hectares of land, reported the media. This will reduce the service area of the complex to 37 hectares from the required 50 hectares.

On August 12, the government ministry asked local authorities to fulfil the original promise it gave to the Tatas. However, the ministry is not sure that its request will be respected, since under the current decentralised regime, local authorities have the power to make final decisions.