Cement producers face hard times

Domestic cement consumption this year is expected to be as low as 52.5 million tonnes due to a reduction in the number of local building projects, the Vietnam Cement Association has said.

Aggravating the situation was an oversupply throughout the industry, while local and export demand was sluggish, the association said.

By mid-July, the cement industry had sold about 26 million tonnes, accounting for 45 per cent of the predicted annual consumption of between 54.5 and 56 million tonnes.

The country’s cement industry has 110 production lines with a total designed capacity of 64 million tonnes annually. However, many plants do not yet run at full capacity. As a result, total production this year is expected to reach 57 million tonnes.

The association added that there were 4 million to 5 million tonnes of stockpiled cement. To offset reduced local demand and the pressure of inflation, producers were looking to boost exports. However, export prices were low while transport costs were high, the association said.

Similar problems last year meant the Vietnam Cement Industry Corporation (Vicem) failed to reach its export target of 1 million tonnes.

Nguyen Sy Ngoc director of Tam Diep cement company, said most of his firm’s products were sold domestically. He added that it was difficult to break into new foreign markets because the export price was lower that the domestic price.

Dao Ngoc Binh, director of the Hoang Thach Cement JSC, said local consumption had decreased while there was an oversupply of cement. If firms stopped production they would incur further losses due to high input costs, he said.

Le Van Chung, chairman of Vicem, said competition among producers would become more intense when production increased, addingthat Vicem planned to open seven cement plants in the near future.

He also said investment in cement projects was normally in hard currencies, which meant repayment of high-interest loans would be a financial burden on producers. He said a number of firms were likely to either default on payments or be forced into mergers.

According to a Vicem report, cement demand would decrease by 1.3 per cent. In the first six months of this year, Vicem’s profit reached just 25 per cent of its yearly plan. Even large firms such as Bim Son and Ha Tien have incurred losses.

This year, Tam Diep cement plant must repay VND370 billion ($17.8 million), while Ha Tien must fork out $19.3 million. Hai Phong cement meanwhile owes $11 million and Bim Son cement, $7 million. – VIR

Tags: Vietnam cement, Vietnam cement industry