JFE Steel eyes stake in Formosa steel project
JFE Steel eyes stake in Formosa steel project
Japan’s JFE Steel plans to spend 30 billion yen (around US$239 million) acquiring a 5% stake in a steel project of Taiwan’s Formosa Plastics in Vietnam’s north-central province of Ha Tinh.
A Nikkei news report said JFE’s investment in the large-scale steelworks costing US$10 billion in the first construction phase aims to bank on rising demand of automakers that are expanding operations in Southeast Asia
The Japanese steel maker is expected to finalize the stake acquisition this August and provide the project with technical assistance in producing half-finished products, including hot-rolled steel sheets. It would sell steel products of the project to processors in the region, not Japanese-made products, to cut costs.
China’s economic slowdown has led to a decline in steel demand on global markets. However, by buying into the steel project in Vietnam, JFE wants to capitalize on growing demand from Japanese automakers investing heavily in Southeast Asia.
JFE plans to focus on products of the construction sector before expanding to steel sheets for automakers and other sectors. In addition, it is considering investment in the second phase of the steel project.
Formosa Plastics started work on the steelworks covering over 3,300 hectares at Vung Ang Economic Zone in 2012. Once completion, the project will comprise six blast furnaces with a combined capacity of 22.7 million tons a year, a 1,600-MW thermal power plant, and Son Duong port able to handle 30 million tons of cargo annually. The first blast furnace is scheduled to come online next year.
Nikkei earlier reported there was a high possibility of JFE returning to Vietnam to cooperate with Formosa Plastics in the steelworks in Ha Tinh after the Japanese firm last September announced to withdraw from the Guang Lian steel project with registered capital of US$4.5 billion at Dung Quat Economic Zone in the central province of Quang Ngai.
At the time, JFE planned to acquire a 10% stake worth around 100 billion yen (US$863 million) in the project.
Industry watchers said cooperation with Formosa Plastics would place JFE in a better position than investing in Taiwan’s E-United in the Guang Lian project.
The investor of the Guang Lian steel project said it had failed to arrange sufficient funding for the multi-billion-dollar steel project. The government of Quang Ngai Province then asked the investor to end the project and is now seeking comments from relevant agencies to complete necessary procedures to cancel the project.
