Tata Steel plans to build a plant in Vietnam, a country whose robust consumption patterns and abundant gas reserves have made it a favoured destination for large global metal and mining companies. In a statement issued two weeks before Tata Steel seeks shareholders’ nod for doubling its borrowing limits, the Jamshedpur-based steel company said that the proposed 4.5-million tonne, $5 billion steel plant would be built through a joint venture with Vietnam Steel and Vietnam Cement Industries.

While Vietnam Steel would have a 30 per cent equity stake, Vietnam Cement will own 5 per cent, the remaining 65 per cent will be owned by Tata Steel. “The first phase of the complex will be a cold rolling mill that is scheduled to be commissioned by the end of 2010,” Tata Steel said in a statement. “We believe this partnership is well placed to make the most of the tremendous growth potential Vietnam possesses,” Tata Steel MD B Muthuraman said.

The move comes barely a month after the Tata group announced its intention to pull out of Bangaldesh, where it had planned to build a steel mill and a power plant, again using natural gas as the feedstock. Lack of concrete gas supply agreements and an uncertain political situation had prompted the Tatas to withdraw from Bangladesh. In comparison, Vietnam has a strong growth potential. Last year, this Southeast Asian country produced 4.2 million tonne, up 10.8 per cent, but still less than 0.5 per cent of the world’s total annual production of 1.34 billion tonne. Vietnam Steel is Vietnam’s largest steelmaker with a capacity of about 5 million tonne.

Gas-fired steel companies typically make high grade, sophisticated steel products if gas supplies are constant. But according to government norms, priority of gas supplies is to fertiliser and power companies first before being given to steel companies. The situation of supplies has dipped sharply leading many such companies to consider production cut.

Tata Steel Global Holding will build the steel plant in Vietnam and also hold a 30 per cent stake in the Thach Khe Iron Ore joint stock company, which would mine ore for the steel complex. Tata Steel, through its subsidiary NatSteel, already has a joint venture with Vietnam Steel for rolling mills.

This is the fourth joint venture that Tata Steel has signed this year. In January, Tata Steel formed a joint venture with Oma’s Al Bahja Group to develop the Uyun limestone deposits at Salalah. In June, Tata Steel’s Rawmet Ferrous signed a joint venture with Jasper Industries to build a 135 megawatt in Orissa, and later it also formed a 50:50 JV with Sail to mine coal in India.