TAIPEI -- Taiwan's China Steel will raise its 5% stake in a steel mill under construction in Vietnam to 25%, pouring roughly $940 million more into the project to ensure that production there gets on track.
It will make the additional investment this April or May in Formosa Ha Tinh Steel -- a Vietnamese arm of leading Taiwanese chemical company Formosa Plastics Group -- which is building the plant. China Steel will also boost technical support for the project.
The initial phase of construction will cost about $10 billion, with the facility coming online by the end of the year with an annual production capacity of about 7 million tons. Plans call for investing another $10 billion to boost capacity to roughly 22 million tons, making the steel mill Asia's largest.
The project is the cornerstone of Formosa Plastics' diversification strategy. Still, many are skeptical that the chemical company will find success in the steel industry. China Steel took a 5% stake in the project back in 2010 but initially had offered little support otherwise.
Demand for steel is expected to rise in Southeast Asia as its growing economy fuels the automobile and appliance markets. China Steel also launched a new steel sheet factory in Vietnam with Nippon Steel & Sumitomo Metal in 2013. It sees Formosa Plastics' new venture as a key source for semifinished steel products needed for its own plant.
Formosa Plastics temporarily halted construction when anti-China demonstrations broke out in Vietnam last May. It has also called on Japan's JFE Steel for investments and is working to get the project on track as soon as possible.