The Formosa Plastics Group’s 2023 annual report revealed that its Vietnam-based subsidiary, Formosa Ha Tinh Steel Corporation, incurred losses of approximately NTD 20.1 billion (around VND 15.7 trillion), doubling its losses from 2022 despite only a 3.2% decline in revenue.
The report attributed these losses to the company’s strategy of lowering prices to maintain market share and retain customers, despite relatively stable raw material costs.
In 2022, the company lost NTD 10 billion due to the development of new steel products for export, coinciding with a global downturn in the steel industry. As a result, the company had to adjust its production processes.
In contrast, Formosa Ha Tinh Steel recorded a profit of NTD 33.47 billion in 2021.
A bright spot for the company in 2023 was its successful entry into the European and American markets.
“The company will continue to strengthen and expand its export sales, develop high-value-added steel products, actively penetrate premium markets, and strive to become a world-class steel company,” affirmed the Formosa Plastics Group.
As a leading FDI enterprise in Ha Tinh province, the challenges faced by Formosa Ha Tinh Steel have also impacted the provincial budget revenue.
In 2023, the province’s total budget revenue reached VND 17,422 billion, meeting 92% of the provincial target and 97% of the previous year’s revenue. Domestic revenue reached VND 8,300 billion, equivalent to 95% of the previous year, while import-export revenue reached VND 9,100 billion, or 98% of the previous year.
The failure to meet the import-export revenue target was mainly due to Formosa’s reduced import of taxable raw materials and tax exemption on steel exports.
This challenge persisted into the first half of 2024, as data from the Ha Tinh provincial portal showed that state budget revenue (excluding tax refunds) as of June 15, 2024, reached VND 7,048.80 billion, a 7.03% increase compared to the same period last year, but revenue from foreign-invested enterprises decreased significantly.
Specifically, domestic revenue from foreign-invested enterprises reached VND 558.54 billion, a 69.03% decrease compared to the previous year. This was mainly due to a significant drop in tax revenue from Formosa, resulting from challenges in the production and business activities of metal products.
Revenue from the balance of import-export activities reached VND 2,233.60 billion, a 7.25% decrease compared to the same period last year, also mainly due to the reduced import-export activities of Formosa.
It is worth noting that in the first half of April 2024, the hot rolling mill of Formosa Ha Tinh Steel underwent major repairs, leading to a halt in steel production. Additionally, the strong influx of steel imports from countries like China and India has impacted the stability of domestic steel production.
A decrease in domestic market share and challenges in international markets directly affected Formosa Ha Tinh Steel, resulting in a significant decline in steel production compared to the previous year.
Consequently, the industrial production index of Ha Tinh province is estimated to have decreased by 3.2% in the first half of 2024 compared to the same period last year.
Overall, the revenue of Formosa Plastics Group’s companies in Vietnam in 2023 totaled NTD 141.5 billion, a 10.5% decrease from 2022. Another subsidiary, Formosa Industries Corporation (also known as Formosa Dong Nai), faced what it described as the “harshest conditions the textile industry has encountered in nearly four decades.”
Afected by negative factors such as high inflation, declining end-demand, and price competition from Chinese textile products, the textile industry could only reduce production in response. As a result, sales of textile, nylon, and rayon products declined, leading to losses of approximately NTD 2.2 billion, similar to the previous year.
Formosa Ha Tinh Steel Corporation received its investment certificate on June 12, 2008. Today, the project for the Son Duong Steel and Deep Sea Port Complex is the largest foreign-invested (FDI) project in Vietnam, with a charter capital of USD 5.5 billion and a total investment of USD 12.787 billion. The company’s major shareholders include the Taiwan-based Formosa Plastic Group, China Steel (CSC), and Japan’s JFE Steel.
The company’s Son Duong Steel Mill and Port project covers an area of 3,318 hectares, of which 2,025 hectares are land and 1,293 hectares are water surface. The steel mill has two blast furnaces with an annual capacity of 7.1 million tons of steel billets.
Formosa Ha Tinh Steel and Hoa Phat Steel are the only two domestic manufacturers capable of producing hot-rolled coil (HRC) steel.
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