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14. May 2007

Tata Steel in race for Vietnam plant

Kausik Datta & Ishita Ayan Dutt in Mumbai

Tata Steel, Baosteel of China and Evraz of Russia are in the race to pick up a majority stake in an integrated steel plant in Vietnam. The project, which could attract Rs 14,000 crore (Rs 140 billion) investment, will have local enterprises as minority partners.

The Vietnam government is expected to announce the winning bidder for the project next month. Tata Steel, if it wins the bid, will have to shell out over Rs 7,000 crore (Rs 70 billion) for the project.

The expression of interest by three companies followed invitation from the Vietnam government for setting up a steel unit with annual production capacity of nearly 5 million tonne.

The local enterprises such as the state-owned Vietnam Steel Corporation and Ha Tinh Mineral & Trade Co will acquire minority stake in the project, to be set up in central Vietnam's Ha Tinh province.

Details of the Tata Steel proposal for the project could not be ascertained. A Tata Steel spokesperson said: "Tata Steel is looking at various locations and countries to expand its operations. At this point in time, none of them are at the finalisation stage."

If it bags the deal, It will be second largest investment by Tata Steel. Tata Steel had recently acquired Corus for $12.9 billion (Rs 52,500 crore) in the largest overseas acquisition by any Indian company.

This acquisition catapulted Tata Steel to the world's sixth largest steel company, from its previous ranking of 52. Three years ago, Tata Steel acquired Natsteel for Rs 1,300 crore (Rs 13 billion) in 2004.

Tata Steel and Evraz had come face to face in another acquisition last year. Tata Steel lost the race for South Africa's Highveld & Vandium to the Russia's largest steel company. Evraz is a vertically-integrated steel and mining company with operations mainly in Russia. In 2006, Evraz Group produced 16.1 million tonnes of crude steel.

Vietnam Steel Corporation had done a pre-feasibility study, which indicated that the proposed steel complex will be located near the Thach Khe iron ore deposit. Thach Khe's reserves are estimated at 544 million tonne averaging 61-62 per cent ferrous content. However, only 30 per cent equity holding in the mine, which will feed the steel project, is up for sale to the foreign companies.

In November, Essar, another Indian conglomerate, announced plans to set up 2 million tonne a year hot strip rolling mill in Vietnam in association with Vietnam Steel Corporation. The project will be located in southern province of Ba Ria-Vung Tau. It is expected to go on stream in 2009. Essar will control 65 per cent stake while Vietnam Steel Corporation will keep the remaining equity interest.

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