Vietnam’s cement sector in crisis as supply exceeds demand

The four cement projects that recently call for government aids in settling foreign debts is only the tip of the iceberg as many other cement businesses are in crisis due to their out-dated Chinese equipment and technology.
According to Saigon Times newspaper, the cement sector has made a mistake in deploying cheap and out-of-date Chinese technology and equipment in production.

Within 8 years during the last 90s, many provinces around the country imported more than 50 vertical shaft cement kilns for their production. But early as 2004, most of the plants employing such kilns were ordered to shut down by the government due to their out-dated, polluting and fuel-consuming technology and low economic effectiveness.

Not long after this shaft kiln lesson, the domestic cement sector jumped into another mistake.

During the past six years, Vietnam has imported a large number of rotary cement kilns from China that are said to consume more fuels and materials than its European counterparts.

A cement expert said up to 70 percent of the rotary cement kilns around Vietnam is using outdated Chinese equipment and technology, which China itself has no longer used since 2010.

Many cement makers said in 2004 and 2005, when the domestic cement supply was not enough to meet demand, cement manufacturers rushed to import Chinese technologies since these were dirt cheap and always available for sales, while European or Japanese ones, which could be more effective, were only sold by order placement.

This increased the nation total cement production by three times, while the demand only doubled, which resulted in the crisis for the cement sector.

The director of a cement manufacturer said many cement makers have sold their products at prices lower than production cost to compete in the context of supply surpassing demand.

“This is a risky move and many firms have indeed failed to repay their debts,” he said.

The asynchronous development between the cement sector and infrastructure is another cause for turbulence of this industry.

With most of the cement plants based in the northern region and the road infrastructure underdeveloped, the cement manufacturers have to spend a great deal on transportation costs.

The fee for transporting a ton of cement or clinker from the northern provinces of Ha Nam, Ninh Binh and Thanh Hoa southwards could be up to 800,000 dong (US$40), accounting for up to 45 percent of the retail prices, a cement maker said. – Tuoitre

Tags: Vietnam cement industry, Vietnam cement sector