Vietnamese cement makers eye overseas markets

The Vietnam Cement Corporation (Vicem) plans to export one million tonnes of cement in 2010. Exporting cement is considered a natural progression for Vietnam, a country where the cement industry has developed strongly, but the question arises: export to where?

In 2009, Vicem units churned out 17.73 million tonnes of cement and 0.22 million tonnes of clinker, reports Thoi Bao Kinh Te Vietnam. In 2010, with seven more cement plants in operation, Vicem’s output is expected to increase to 20 million tonnes.

In March 2010 alone, state-controlled Vicem and other Vietnamese companies produced 4.09 million tonnes of cement; and for the first quarter, total output reached 11.13 million tonnes. Meanwhile, domestic cement consumption is down a bit, reaching only 10.27 million tonnes in the year’s first three months.

At least until a lot more infrastructure projects start up, the supply of cement has outstripped domestic demand. Vietnam’s 105 cement plants have a designed annual capacity of 61 tonnes of cement. Actual output is about 53 million tonnes a year, but demand is unlikely to exceed 50 million tonnes in 2010.

The Government has tried to be helpful by instructing that roads in rural areas ought to be built with concrete. Tran Van Huynh, Chairman of the Vietnam Construction Material Association, says this not an efficient way to consume cement because cement roads in rural areas are rarely built well. Huynh stresses that the best way to deal with surplus cement is to export it.

Since late 2008, Vicem and some other cement producers have been eyeing neighbouring markets such as Cambodia, Laos and China. Some export contracts have been signed, but the value and volume of these exports is small.

Some producers more daring than Vicem are seeking markets as far away as Africa, Europe or the US. Cam Pha Cement Company, for example, has exported 12,500 tonnes of cement to South Africa. It has a contract with Pionaire Finance Ltd to export 40,000 tonnes a month to that region. Cam Pha Cement has also negotiated a contract with Universal Best Services, LLC to supply millions of tonnes of clinker and cement annually to the US and South American markets.

These contracts suggest that there’s a foreign market for Vietnamese cement. Now the challenge is to export cement products in large quantities. Till now, Cam Pha’s principal customer has been Vinaconex, the big state-controlled construction firm.

According to Bui Hong Minh, General Director of the Cement Finance Corporation, exports of cement can be thought of as a ‘valve’ that regulates the domestic market at present and in the future. However, Minh said, enterprises still have to overcome difficulties in export. Most cement exports now are arranged by middlemen, meaning that exporters have to pay a high brokerage fee, which pushes their product prices up and reduces their competitiveness.

Analysts say that in Laos and Cambodia, Vietnamese cement is inferior to Thai products, but that’s not true. In fact, Vietnam’s products have high quality, but they have higher sale prices because transport costs are higher. Besides, since Thai clinker is cheaper by 10 percent than Vietnam’s, the cement production cost is lower for Thai companies.

Huynh thinks that cement exports are unlikely to reach one million tonnes in 2010 proves to be unfeasible. Until now, domestic cement producers have not paid attention to export, but only on competing with other in the home market.

Some experts believe that it is a blunder for Vietnamese cement producers to target big markets like the US or Europe. They explain that the US and Europe are areas where infrastructure is already highly developed, which means that the demand for cement for construction is not high any more. As important, customers in these markets are difficult to please. They demand not only high quality products, but also other things such as specialty products and attention to environmental protection standards – requirements that Vietnamese producers cannot yet meet.

The analysts said that developing countries in Africa and elsewhere, where the infrastructure is still poor, should be the targets of Vietnamese enterprises.

Thoi bao kinh te Vietnam

Tags: Vietnam cement, Vietnam cement exports, Vietnam cement industry