Glut of cement may push exports

Experts warn that a major cement glut is poised to hit the domestic market in the coming years as several new factories go into production.

Ngo Quang Diem, deputy head of the Ministry of Construction’s Building Materials Department, said exports of cement and clinker should be increased to deal with the glut after domestic demand stabilises.

However, current indications are that local businesses will find it difficult to expand their business in overseas markets.

The Viet Nam Cement Industry Corporation (Vicem), which supplies more than 40 per cent of the cement in the domestic market, has set an export target of one million tonnes for this year. It has not been able to reach half the target in the first six months.

Vicem is discussing with importers in Cambodia, Lao, China and the Middle East region ways to push up shipments in the remaining months.

However, the company said it does not have high expectations from these markets because of high transportation costs and tough competition from local producers.

So far, very few companies have been able to find overseas buyers.

Dinh Van Huynh, chairman of the Viet Nam Construction Materials Association, said apart from high transportation costs, strict quality requirements including environmentally friendly stipulations have made the situation a difficult one for exporters.

According to the Ministry of Construction, the country has 106 cement factories with a total designed capacity of 63 million tonnes per year.

It also estimates a cement surplus of two million tonnes this year, and forecasts this will rise to eight million tonnes and 15 million tonnes in 2011 and 2012 respectively.

At the beginning of the year, the Ministry of Construction asked local People’s Committees to stop approving investment projects in the cement industry by 2020.

It has also called for temporary deferment of new projects that are yet to break ground.

On June 28, Nguyen Tran Nam, deputy minister of construction, issued an instruction on ways to promote the business, expand the market and limit import of building materials.

Local businesses are asked to try and export 5-10 per cent of building materials produced in the country.

Nam stressed the need for different localities to seek appropriate solutions, including boosting consumption, to deal with the cement surplus. By 2020, at an average price of VND1 million per tonne, the surplus cement will be worth about VND15 trillion (US$789.4 million), he cautioned. — VNS

Tags: Vietnam cement, Vietnam cement industry