Vietnam government to pump more money into problematic steel firm

Vietnam government to pump more money into problematic steel firm

The State Capital Investment Corporation (SCIC) has been ordered by the prime minister to pump at least VND1 trillion ($47.4 million) into loss-making Thai Nguyen Iron and Steel JSC (UPCoM: TIS).

The prime minister has allowed a revival of the project to expand TIS’ production, according to the Government Office, and asked the Bank for Investment and Development of Vietnam (BIDV) to restructure TIS’ current debts and lend more to the group so that it can complete phase two of the project.

TIS reported consolidated losses of VND109 million ($5,166) in the first half of 2014, compared to a loss of VND844 million ($40,000) in the same period last year. As of June 30, TIS, whose equity stood at VND1.71 trillion ($81 million), had liabilities of VND7.541 trillion ($357.4 million), of which VND2.2 trillion ($104.2 million) was short-term debts.

The project to expand TIS started in 2007 but has been suspended twice due to capital shortages and unfavourable market developments. The cost for phase two has risen from the initial VND3.843 trillion ($182.1 million) to VND8.104 trillion ($384 million). The value of the partly finished phase two is VND4.330 trillion ($205.2 million), according to TIS’ first half financial statement.

The Vietnamese steel market is led by two firms, namely Hoa Phat Group (HOSE:HPG), which has 18 per cent market share, and Pomina (HOSE:POM), which has 15.9 per cent market share, both as of the first half of 2014. HPG plans to expand its capacity to become Vietnam’s biggest steel firm by output within the next two years.

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