Cement industry loses loan guarantees

The Government will stop guaranteeing overseas borrowings by cement enterprises following a report by the State Auditing Agency that four companies are likely to default on repayment and have sought support from the Ministry of Finance.

The Government had guaranteed foreign loans worth US$1.36 billion for 16 State-owned cement companies out of whom Dong Banh, Thai Nguyen, Tam Diep and Hoang Mai companies were facing financial problems and could not repay, said the Minister of Finance, Vuong Dinh Hue, during a press meeting in Ha Noi on Thursday.

Analysts warn many others could end up in the same boat.

The reasons are not hard to find: the mushrooming of cement plants in the country leading to a massive oversupply and the ineffective operation of plants due to the use of outdated technologies.

In 2004 the cement industry began to adopt the Chinese rotary kiln technology and imported machinery at low prices though they are much less efficient than technologies and equipment imported from Europe or Japan, according to Saigon Economic Times.

But what made things worse was that the number of cement plants licensed rose three-fold in the last seven years while demand just doubled.

Thus, while there are 110 factories with a designed capacity of 64 million tonnes annually and current production is around 57 million tonnes, demand is expected to be only 52.5 million tonnes this year due to a reduction in the number of building projects, according to the Viet Nam Cement Association.

The association added that in addition there were 4-5 million tonnes in stock.

Producers are looking to boost exports but international prices are low while transport costs are high.

Dao Ngoc Binh, director of the Hoang Thach Cement JSC, says if firms stop or reduce production, they would incur even higher losses due to high fixed costs.

In such a situation, many of the newcomers have to sell their products at “competitive” prices that may be lower than their production costs.

Saigon Economic Times said while the prices of feedstock and production costs had doubled or tripled since 2003-04, cement prices were lower than they had then.

Clearly, there has been a failure by the relevant authorities to monitor the import of equipment and technologies for cement manufacture, draft a master plan for the industry, and accurately forecast the growth of the market.

Vietnamese not welcome

The customer may be God, as a Japanese saying points out, but sometimes they turn out to be devils, some homeowners in the Cuu Long (Mekong) Delta say.

Sai Gon Tiep Thi (Sai Gon Marketing) magazine quotes tour guides in Tien Giang Province as saying that many old houses in Cai Be District welcome foreign guests but refuse to entertain Vietnamese tourists.

Phan Van Duc, owner of Ba Duc Ancient House in Dong Hoa Hiep Village, told a tour operator that he would take in local visitors only if they came in tour groups organised by well-known travel agencies.

Duc said both foreign and local guests used to be equally welcome at his house. But then he found that some locals badly damaged the house and his orchard while foreign guests always showed consideration and respect.

“They [local guests] picked even unripe fruits and badly littered the facility,” he said.

Others had asked him to serve meat of rare animals like snakes and turtles and paid little heed to the environmental protection.

“During lunch, they always drink and become loud.

“I am afraid that foreign guests may leave my house if they see such behaviour.”

Le Thi Chinh, manager of an old house named Ut Kiet, explained: “It is much more difficult for us to serve local guests who always demand specialties.”

Director of the HCM City-based Lua Viet Travel Company, Nguyen Van My, says most Vietnamese tourists prefer drunken merrymaking and massage services to absorbing the cultural values of places they visit.

Huynh Thanh Huu, the head of the travel sector at the Tien Giang Department of Culture, Sports and Tourism, hopes the refusal by the old houses to allow local tourists would shock them into changing their behaviour.

Fish dealers can’t deliver

Many foreign importers are offering attractive prices for tra catfish and want large quantities, but exporters have to reject their orders because of a shortage of the fish.

Duong Ngoc Minh, general director of the Hung Vuong Seafood Co said many European and US importers came last week looking for big volumes of tra filet.

Minh said that they wanted deliveries in the fourth quarter of this year and the first quarter of next year and offered average prices that were 20 per cent higher than in July.

Just a couple of weeks ago, analysts had predicted exporters would be in trouble in the last few months of the year due to the economic crises in Europe and the US which would force consumers to tighten their belts.

Farmers had immediately called for help as buyers, who supplied fish to seafood processing companies, refused to buy from fish farms, leading to a sharp decline in tra prices.

But tra remains on top of the import list in western countries because it is cheaper than most of other seafoods.

The rising demand for tra products in the European and US markets has caused stiff competition among seafood processors to scramble for the fish.

On August 30 first grade tra sold at VND24,500 per kilogramme on the domestic market, up VND1,500 from the previous fortnight. But even at the higher price, seafood processors find it difficult to source the fish.

The steep rise in fish costs and bank lending interest rates and the fall in tra prices caused losses to farmers and forced many of them to leave their fish ponds idle.

According to feed manufacturers, sales have dropped by 20 to 50 per cent in the past few months even as tra prices dropped from VND28,000-29,000 to VND20,000-21,000. The Viet Nam Association of Seafood Exporters and Producers (VASEP) sounded a warning about a serious shortage of tra from September onwards.

Viet Nam exported nearly 400,000 tonnes of tra in the first eight months for US$1.1 billion, a 4 per cent increase in volume and 25 per cent rise in value year-on-year.

VASEP said with the conditions becoming favourable, exports this year could top $1.5 billion. — VNS

Tags: Vietnam cement industry