Essar Steel said on Monday it has joined hands with two state-run Vietnamese companies for setting up a two million tonne steel plant in southern Vietnam at a cost of $527 million (about Rs 23.71 billion).

The company, through is Singapore subsidiary Essar Steel Vietnam Holdings Pvt Ltd, has signed a joint venture agreement with Vietnam Steel Corporation and Vietnam General Rubber Corporation to set up the plant in Phu My Industrial Zone in southern Vietnam.

In the project, expected to be complete within 30 months, ESVHL would hold 65 per cent equity, while VSC and GERUCO would hold 20 per cent and 15 per cent equity respectively, an Essar Steel release said.

Vietnam currently consumes six million tonnes of steel, of which hot rolled coils account for two million tonnes. The country's steel consumption is projected to shoot to 10 MT by 2012.

"In the absence of a flat steel plant, Vietnam imports its entire requirement of hot rolled coils. This project is expected to substitute import of hot rolled coils into the country, saving valuable foreign exchange," the release added.