Why are steel projects often located in coastal areas?

In 2017, the Ministry of Natural Resources and Environment will build environmental planning, which will be very attentive to the impact of industrial production to the sensitive areas. Illustration.

Coastal areas have many advantages

Recently, the Hoa Phat Group proposed to the the Quang Ngai Provincial People's Committee to take over and buy the liquidated assets of the Guang Lian steel project in the Dung Quat Economic Zone. This proposal was approved by Quang Ngai Province and now is being consulted with Ministries and branches. Hoa Phat's project has a total investment of about $US 2-2.5 billion, a capacity of 4 million tons/year. Earlier, in 2006, the Guang Lian steel project was invested by the Tycoons Group (Taiwan, China) and has been granted an investment certificate with initial capital of $US556 million, but this project’s certificate was obtained in 2015. not only Hoa Phat, but the Hoa Sen Group is also known to propose to takeover this project.

Earlier, in August, 2016, the Hoa Sen Group has also caused waves of public opinion when it proposed to have a steel project with invested capital up to $US 10 billion at the Ca Na and Ninh Thuan coastal areas. In 2007, the Posco Group (Korea) has also considered construction of an integrated steel plant in the Van Phong Economic Zone (Khanh Hoa). Along with several other coastal steel projects, including the major projects such as the Hung Nghiep Formosa Iron and Steel Complex in Vung Ang Economic Zone (Ha Tinh province) etc. So, coastal areas are very attractive for steel production enterprises.

Explaining this issue, Mr. Nguyen Van Sua, Vice Chairman of the Vietnam Steel Association said that steel companies desire to invest their steel projects at the coastal areas due to Vietnam does not have the favorable conditions for the development of the steel industry like natural resources, particularly iron ore and coking coal. The Thach Khe mine (Ha Tinh province) is the biggest mine but has not yet been put into production so that the ore sources still need to be imported. For a steel plant with large volumes, from 5-7 million tons or more, the number of raw materials and finished products shipping is huge, usually 4 times the output. For example, the plant has an output of about 5 million tons, the amount of shipping will be about 20 million tons/year. Therefore, the choice of coastal areas, especially where there are the deep-water ports, is very essential for the large-scale production plants.

Whereas, according to Mr. Phan Dao Vu, General Director of the Vietnam Australia Steel (Vinausteel), the layout of coastal steel projects mainly related to the transport of the imported raw materials as well as exporting products since transporting by sea is very convenient, inexpensive and easy to deal with the waste. If the plant is located inland, when the materials come to the port, need to be transported to the plant by road, usually by trucks. With distance of about 150 km, it will cost an additional 200,000 vnd/ton and the finished products continue to be transported by road to ports for export. Therefore, without taking advantage of water transportation, the cost of transport will rise. Also maybe due to factors related to the environment, the waste and emissions disposal will be more favorable when the coastal areas are often far from residential areas.

Further clarification on this matter, representative of an FDI enterprise in the steel industry said that, in Vietnam, there is not much iron ore, coal is also unavailable, which means the two main raw materials for steel production must be imported. However, with a large volume of raw materials import, up to tens or hundreds of thousands of tons, there is a need to have a sufficient deep port to dock, besides, the disposition of coastal projects will be advantageous for businesses, the transportation of coal from ports to factories will be smooth and reduce costs for businesses as well as reduce production costs. In the world, there are many countries like Japan, Korea etc. which have many steel plants, and most of them are also located on coastal areas, very few are located on the mountainous areas like the Thai Nguyen Steel Plant in Vietnam. Even though the factory is located inland, not near the sea but still able to work well because it is between the iron ore mines and coal, that supply raw materials for its operations.

Need to control waste discharge

Also according to above FDI enterprise’s representative, projects located in coastal areas will also facilitate the supply of water since groundwater resources in coastal areas usually are more plentiful. “The placing of a coastal steel plant is very normal, the problem is how to control the environmental pollution of these projects, especially for private companies’ projects. The Ministry of Natural Resources and Environment, Departments of Natural Resources and Environment of the provinces needs to tightly control this problem”, the representative said. According to this leadership, environmental legislation of Vietnam was good, but in the implementation process, some companies do not comply, so that the waste discharge does not reach the standards. In these projects, the steel slag yards are usually near the plants with the liquid waste handling systems before discharging it into the environment, however, the operation of this system is often very expensive, so in order to save costs, many companies do not comply with the process according to international standards. In addition, Vietnam’s steel is competing with cheap products from China, that need to reduce costs to compete. Under this pressure, many businesses choose to use obsolete technology or modern technology, but do not operate the waste discharge system in line with the regulations. Mr. Nguyen Van Sua also said that the environmental issue in steel projects must be paid particular attention, to monitor, test, quality control to all waste discharge to be in line with current standards, including the standards of solid, gas, liquid waste discharge etc. issued by the State. The Vietnam Steel Association also always recommended all members comply with all provisions of the law, including regulations on the environment and waste discharge.

In this regard, Deputy Minister of Natural Resources and Environment Vo Tuan Nhan said, allowing of investing coastal steel projects is not wrong, in order to create favorable conditions for businesses, but the problem is how to manage the companies’ waste discharge. However, he also noted that the areas that serve for tourism and aquaculture must be planned, ​​ steel companies cannot be located in these areas. The businesses have to comply with the environmental protection legislation, and have to build the solid waste, gas waste and water waste handling systems in accordance with the Vietnam technical process.

Representative of the Ministry of Natural Resources and Environment also said, in 2017, the Ministry of Natural Resources and Environment will build the environmental planning which will pay much attention to the industrial production impacts on sensitive areas, and these areas will be planned in advance, with strategic environment assessment, advance warning for each locality to avoid sensitive projects, said Deputy Minister Vo Tuan Nhan.