Lao Cai Iron and Steel Firm in the Storm

9:56:06 PM | 30/9/2015

Viet Trung Metallurgy and Mineral Co., Ltd (VTM), a joint venture between Vietnam Steel Corporation, Lao Cai Mineral Company and Kunming Iron and Steel Group (China), is located in Lao Cai province which is rich in mineral resources, particularly iron ores. The company is allowed to invest in Lao Cai Iron and Steel Plant and operate Quy Xa iron mine. The total investment value is approximate US$337.52 million, of which Lao Cai Iron and Steel Plant costs nearly US$307 million and Quy Xa iron mine needs a total investment capital of US$30 million. The mill has a production capacity of 500,000 tonnes of steel ingots a year in the first phase.
Situated on a campus of nearly 70 ha in Tang Loong Industrial Park, Bao Thang district, Lao Cai Iron and Steel Plant was inaugurated and put into operation on September 21, 2014 after three years of design, construction and equipment installation. By design, the facility will produce about 2,000 tonnes of pig iron a day used for manufacturing steel billets used for rolled steel production in Lao Cai province. In the second phase, the designed annual output will be doubled to 1 million tonnes of steel which will be sold in Lao Cai province and Northwest region and exported to other countries. Planned to employ nearly 600 workers, the plant is expected to pay VND700 billion of tax a year to Lao Cai province, equal to a quarter of the province’s current tax revenue.
The steel ingot market is deteriorating. Particularly, in late 2014 early 2015, the sharp decline in steel ingot prices in the world and in the region wrecked on steel manufacturers and traders. The current selling price of steel billets is VND7.5 million a tonne, much lower than the 2006 rate of VND11.5 million. Due its new operation, production lines have not been fully tuned up for the highest efficiency. Besides, prices of key inputs do not decrease, resulting in high production costs.
To overcome production and business difficulties, the company has adopted competing measures to reduce input prices, extraction and processing costs in Quy Xa ore mine; cooperated with researchers to work out perfect blending formula for iron ores in Quy Xa mine, sought measures to reduce material and fuel consumption; revised technical and economic norms and indicators. The company also boldly sped up market researches and searched for customers to boost consumption, launched thrift exercising movements, and reduced all kinds of company-wide expenses. With these efforts, VTM’s iron and steel plant is being operated as designed. In the first six months of 2015, VTM produced 240,000 tonnes of steel and sold 180,000 tonnes, meeting 50 percent of the plan.
The steel supply will be still in excess in the coming time. Domestic firms will have to compete more strongly with rivals from Russia and China. This will place enormous pressures on domestic steelmakers as well iron ore producers amid falling prices. Before this reality, VTM will continue to apply multiple management and technical solutions to lower product costs; study market information to work out appropriate steps and measures to build sustainable relationships with input suppliers and seek strategic customers to expand sales.
VTM Deputy Director Ngo Sy Hieu said, the Prime Minister recently issued Official Document 1398/TTg-KTN on removing difficulties for Lao Cai Iron and Steel Plant. Accordingly, the Prime Minister agreed on postponement of VTM’s payment for ore rights in 2015 to 2016, agreed on export of 1.5 million tonnes of limonite ores in Quy Xa to exchange for coking coal for the plant. He expressed his desires that VTM will continue to receive supports from the Ministry of Industry and Trade to tackle existing difficulties. In the spirit of friendship and cooperation for mutual development, the company also asked the ministry to adopt technical measures to restrict importing steel which can be made by domestic firms. Besides, the Government will have policies to encourage domestic billet production from iron ores because it has far-reaching impacts on the domestic economy and helps promote the development of other economic activities.