Formosa Plastics: Start-up of First Furnace in Vietnam Steel Mill to be Delayed Due to Anti-China Riots

With the recent mob protests due to territorial disputes between Vietnam and China severely damaging foreign-owned factories in the former, Formosa Plastics Group of Taiwan confirmed that its steel mill in Ha Tinh Province will be forced to postpone start-up of the first furnace.

Owned by Vietnam-based Formosa Ha Tinh Steel Corporation, established jointly by the group's four flagship companies, namely Formosa Plastics Corp., Nan Ya Plastic Corp., Formosa Chemical & Fibre Corp. and Formosa Petrochemical Corp., and other partners, the steel mill has cost over US$6 billion in investment so far, with the first and second furnaces scheduled to start up in May 2015 and May 2016, respectively.

However, the group said that the start-up of the first furnace is certain to be delayed for one to two months, primarily because construction has been suspended by the contractor, China Metallurgical Group Corporation, after evacuating some 3,000 Chinese employees from Vietnam in response to the recent riots, which has so far claimed dozens of Chinese workers.

After an initial assessment, directors from Formosa Ha Tinh Steel reported that the violence in Vietnam has destroyed many of the firm's office equipment, warehouses to result in loss of roughly US$3 million.

However, industry insiders said that the loss will rise given that the start-up delay will surely incur additional interest expense to investors who owe syndicated loans for building the steel mill.

Formosa Plastics Group said that it will claim financial compensation or tax relief from the Vietnamese government in the short term, and stressed that the steel mill's second furnace will start up as scheduled. (SC)