“Last month JFE said that it was withdrawing its offer to buy a majority stake in the $4.5 steel mill licensed to Taiwan’s E-United Steel in Dung Quat Economic Zone,” said Le Van Dung, deputy director of the Dung Quat Economic Zone Management Authority, in an interview with VIR last week.

A senior official from the Ministry of Planning and Investment (MPI) also confirmed the decision with VIR and noted that the ministry and the government had received documents to this effect.

“JFE explained the decision as having to do with the downturn of the global steel market, and particularly the number of integrated steel mills in Vietnam and southern China,” said the official, referring to the projects by Formosa Plastics Group in Ha Tinh and Posco in the south of Vietnam.

Originally, in March 2012, JFE Steel announced it would acquire a majority stake in E-United Group’s multi-billion dollar steel project, licensed in 2007.

The Japanese steel maker submitted a pre-feasibility study on the project to the government and requested a permanent 10 per cent corporate income tax rate.

It also asked the government to cover the cost of site clearance for an additional 338 hectares, worth about VND800 billion ($38 million). JFE Steel also requested that an adjoining access channel be dredged to accommodate vessels up to 50,000 dead weight tonnage, which would have cost around $100 million.

Before it would decide on the incentives, the government requested JFE reaffirm its intention to acquire and carry out the project.

“I don’t think the government’s delay on the incentives issue was the main reason for the company’s withdrawal. I think it has more to do with poor market conditions,” said the MPI official.

Dung from the economic zone authority noted that right after JFE confirmed it would be withdrawing from its offer, E-United sent a document confirming its intention to continue investing in Dung Quat. To date E-United has disbursed around $73 million for site clearance and other initial works. The provincial committee has handed over 337 hectares to the investor.