Vietnamese cement producers cannot find export markets

Domestic cement producers are seeking new markets to export products, since the domestic supply has far exceeded the demand. However, this proves to be an “impossible mission”.

The story about the cement overproduction was first mentioned in 2010. Only in that year, did the Ministry of Construction recall the commitments made by the three foreign invested cement factories when receiving the investment licenses that they will export their products instead of selling domestically. And the ministry hurried the three producers to fulfill their commitments.

By the end of 2010, Vietnam had exported nearly 1 million tons of cement and clinker. However, the export was not made by the three foreign invested enterprises, but by the Vietnam Cement Corporation (Vicem) and Vissai Ninh Binh.

In the first eight months of the year, Vietnam exported 2.8 million tons of cement and clinker, the highest ever level in the history. Vissai Ninh Binh and Vicem remain the two biggest exporters.

Despite the encouraging initial achievements, Vicem’s subsidiaries still believe that exporting cement is an impossible mission.

“The biggest obstacle for Vietnam’s cement products is not the lack of the export markets, but is the lack of competitiveness and the good infrastructure conditions,” director of a cement company said.

Unlike many other different goods, cement is bulky but it has low value. The biggest problem for cement exporters is the high transport fee. The most ideal export markets for Vietnamese cement products are South East Asian and South Asian countries, which are not too far from Vietnam, which allow to minimize the cost freights.

However, it is not easy to bring the products to South East Asian and South Asian countries, because they are also the targeted markets for other big cement producers in the region, including Thailand, China, Indonesia and Taiwan.

As such, it is very difficult to squeeze into the nearby markets in Asia. Most of the cement production lines in Vietnam have just become operational. Meanwhile, in other regional countries, the amortization periods of cement factories has finished. This means that the production costs of Vietnamese enterprises are higher than that of Taiwan, China and Thailand.

Especially, Vietnamese products are at a big disadvantage because producers have to pay the sky high interest rates of 20-21 percent. Meanwhile, the interest rates in regional countries are just several percent.

In the first eight months of 2011, Vissai Ninh Binh exported 1.2 million tons of clinker to Bangladesh through a Hong Kong’s company. Meanwhile, Vicem tried to bring cement and clinkers to neighboring countries of Laos and Cambodia. In order to compete with Thai products, Vietnamese enterprises have to export cement at the low price of 55 dollars per ton, or just equal to 60-65 percent of the domestic retail prices.

Vietnamese cement producers understand well that the Middle East, Africa and North America are the big cement import markets. Therefore, a lot of Vietnamese producers once tried to export products to the regions. However, some of them have given up the idea, while others have just exported tens of thousands of tons.

In order to carry cement products to far markets, it is necessary to use the big vessels with the minimum tonnage of 50,000 tons. Meanwhile, Vietnam still does not have any ports capable to receive such big ships. Therefore, enterprises will have to use lighters to carry cement to the anchorage places.

“It will take at least one month to load 50,000 tons of cement into ships if using this way. It will take one month more to ship cement to Africa, and then one more month to carry cement from ships to construction sites,” a cement company’s director said, noting that cement products can be used just within six months after the manufacturing date.

Source: TBKTSG

Tags: Vietnam cement industry, Vietnam cement sector