Japanese Trading Giant buys stake in Vietnamese Steel Plant

According to the latest reports, Japanese trading company, Hanwa which deals with wide range of products including steel and construction materials has bought 65% stake in Vietnamese coil maker SMC Hanoi One Member Co.

The coil plant located in Hanoi is capable of processing 10,000 tonnes a month and is equipped with two large-sized slitters, which adjust the width of coils supplied by steelmakers, and one large-scale leveller among other machinery. The joint venture has been named as Hanwa SMC Steel Service Hanoi Co. The move is said to capitalize on the growing demand for steel in Vietnam's fast-growing northern region.

The deal is the company's first direct investment in the Hanoi region. Hanwa SMC Hanoi is the third joint venture between SMC and Hanwa, after the first joint venture is SMC TOAMI specializing in manufacturing welded wire mesh and the second joint venture is Sendo Steel Pipe Joint Venture Limited Company.

Hanwa's and SMC Hanoi's joint venture will continue to enhance the position both the companies in the domestic and foreign steel markets, opening favorable opportunities for the development of flat steel products and serve the supporting industry.

Vietnam has become one of the key destinations for setting up of steel plants due to its growing domestic demand and also because of its political stability compared to other emerging economies.

Amid the US - China trade war, steel producers operating in China, Japan and even Korea want to move their facilities to avoid the US's tariff targeting China.

As per the industry research, steel demand in Vietnam is expected to increase by about 10% for long steel and flat steel products. Most of the industry's long steel output is consumed domestically, while about one third to one half of flat steel is exported. The long steel consumption is estimated approximately 12 million tonnes in 2019, accounting for 68% of total consumption. For galvanised steel products, consumption will be at 4.5-5 million tonnes.

It is being estimated that the number of industrial projects may rise thanks to the increase in foreign direct investment (FDI) and public spending on the infrastructure. Infrastructure spending in Vietnam has been growing at a double digit rate each year since 2012. The defensive tax on imported steel is set to expire in 2021. Vietnam's steel industry will thrive in the long term due to the favourable macroeconomic environment and potential FDI flows.