Cement industry slammed for ‘overly hot investment’

After criticisms of the tile and then steel industries, now the cement industry is being slammed for ‘overly hot investment’. The Ministry of Construction and related companies must strain to settle overproduction.

Every year, Vietnam consumes a large volume of cement to develop infrastructure and build houses. Development experts claim that it is therefore necessary to develop the cement industry.

Yet it is also necessary to reconsider this development strategy. When Vietnam exports cement and earns foreign currency, in return the country sacrifices its limestone mountains and damages its beautiful landscape.

Ngo Minh Lang, General Director of Ha Tien 1 Cement Corporation, did not respond, but he talked instead about limestone mountains, which are the main source for cement material.

“Removing limestone to make cement means that beautiful limestone mountains will disappear forever,” he observed.

By the end of June 2010, Vietnam had had 108 cement production lines with the total design capacity of 65 million tons annually. Design capacity has increased by two-fold within just four years. Even though some cement plants have not operated at maximum levels, overproduction has appeared, as the total demand is expected to reach 58 million tons this year alone.

According to cement manufacturers, the 2010 surplus will be at least five million tons. Cement production capacity will still increase sharply in the time to come, because more and more cement plants are being built as part of the industry development strategy.

By 2020, Vietnam’s cement industry will have a capacity of 130 million tons, while Vietnam will become one of the three biggest cement producers in the world, after China and India.

In order to solve overproduction, the Ministry of Construction and cement enterprises are trying to export cement products.

The Vietnam Cement Corporation (Vicem) aims to export one million tons of cement this year. Other cement producers have signed contracts to export tens of thousands of tons.

Yet the goal of exporting one million tons in 2010 will be unattainable. Laos and Cambodia consume cement in small quantities and Vicem has not located other export markets. Other countries in the region are also facing a cement surplus they too have been trying to export cement products at low prices.

According to Lang, Taiwan is putting out 23 million tons of cement per annum, while the domestic market consumes only eight million. European plants are facing the same situation, so any markets with demand for cement become centers of fierce competition among cement exporters.

Singapore is one example. The heated competition among cement producers there has made cement prices the lowest in Southeast Asia.

As such, development analysts say, Vietnam has almost no opportunity to export cement. Most cement plants are newly-invested plants and they cannot lower prices to boost exports.

Domestic cement producers are still lucky, however, as they can still sell cement in Vietnam, where demand is still increasing. Transport fees, storage charges and import tariffs all help domestic producers compete with imports.

Currently, the demand for cement in Vietnam is increasing yearly by 10-13 percent.

Tags: Vietnam cement, Vietnam cement industry