Taiwan Today

Formosa Plastics Group announced July 6 it will invest in a project to build a cold-rolled steel sheet plant in Vietnam at the invitation of Taiwan-based majority shareholder, China Steel Corp. A person close to FPG said the group’s decision to take a 5-percent stake in China Steel Sumikin Vietnam Joint Stock Co. marks the first cooperative steel sector investment between the two industrial giants. Formosa Group’s move follows Feng Hsin Iron and Steel Co. Ltd. relinquishing its 10-percent stake in the project last month in the wake of sliding international steel prices. According to a source familiar with the situation, the joint venture’s ownership agreement required Feng Hsin to satisfy an NT$1-billion capital call. Consequently, its board of directors determined the risks to be too great and decided to withdraw from the project. The source said China Steel immediately contacted Formosa Group and invited them to purchase half of Feng Hsin’s stake. The remainder is likely to be snapped up by co-owner Japan-based Sumitomo Metal Industries Ltd., they added. If all goes to plan, ownership of the company will be divided between China Steel (51 percent), Japan’s Sumitomo Metal Industries Ltd. (35 percent), Formosa Group (5 percent) and other Taiwan-based partners, including Chinfon Trading Group, Hsin Kuang Steel Co. Ltd. and Chun Yuan Steel Industry Co. Ltd. Investment in the new venture is estimated at about NT$37 billion (US$1.15billion), with half of the total to be financed through shareholder capital and the remainder with loans. A representative of the joint venture said China Steel’s move to bring FPG on board makes perfect sense, as domestic enterprises in the same industry should join forces to break into new overseas markets. Industry analysts similarly view the tie-up as a logical move for both firms, with Formosa Group already receiving the green light from Vietnamese authorities to build a steel mill in Ha Tinh Province. The plant, expected to produce about 30 million tons of steel annually, will supply the joint venture company’s cold-rolled steel sheet plant, also to be located in Vietnam’s central region. (SB-JSM)