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Cement producers bemoan slow sales   2010-08-06 - Thoi bao Kinh te Vietnam

With many high capacity cement plants, the cement supply in Vietnam has far exceeded the domestic demand. Cement producers have tried to boost exports to ease overproduction, but this is not an easy task. 

 

 
Anticipating the high cement output in 2010, the Vietnam Cement Corporation (Vicem) plans to export one million tons of cement, but it has admitted it may fail to reach this target. The Government has agreed in principle to a proposal by Vicem to build cement-made highways and roads. However, the Ministry of Transport still has the ultimate authority on whether cement is used in these construction projects.

 

Market share down, inventory volume up

 

In the first six months of the year, the cement supply increased by 10 million tons, while the consumption increased by only 1.8 million tons.

 

According to Vicem, the market share held by its member companies has decreased by 0.6 percent in the first seven months of the year in comparison with the same period last year. Only 27.92 million tons of cement were sold in the last seven months, or 55.8 percent of the 2010 sales forecast.

 

Nguyen Van Tung, Chief Secretariat of Vicem, said due to the sharp cement supply increases in the first months of the year, some non-Vicem producers have been trying to sell cement at below market prices, because these producers need money to pay back bank loans. Meanwhile, cement production costs have increased due to price increases in materials since late 2009. The coal price, for example, has increased by 70 percent, oil products by 40 percent, and Kraff paper by 12 percent. 

 

Since other producers sell cement at low prices, the sale of Vicem’s member companies has been heavily affected, leading to higher cement inventory.  By the end of June, Vicem’s stocks had reached 1.53 million tons.

 

How to prevent overproduction?

 

In late 2009, after reviewing strategy for the cement industry, the Ministry of Construction said some measures need to be taken immediately to solve the overproduction problem.

 

The Ministry has requested that local authorities not license new cement projects. The Ministry  specifically asked the Government to order the stop of some projects that have been slowly implemented.

 

However, despite warnings about overproduction, more cement projects have been licensed by local authorities.

 

On July 10, 2010, the construction of the Thanh My Cement Plant, financed by Xuan Thanh Group, was kicked off in Quang Nam province. The project, capitalized at four trillion dong, is expected to be completed within 24 months. Once operational, the plant will have the capacity to produce two million tons annually.

 

In early July, the Thua Thien-Hue Province People’s Committee handed over the investment license for Long Tho II Cement Plant to Song Hong Corporation. It will be a furnace cement plant in Huong Tra District and is designed to have a production capacity of 350,000 tons a year. The project has an initial investment of 763.675 billion dong.

 

The Ministry of Construction has also urged enterprises to export their products to clear stocks. However, Le Van Toi, Director of the Construction Material Department under the Ministry of Construction, admitted it is very difficult to find export markets, which explains why export revenue remains modest.

 

Besides, Toi said, cement is a product that takes up a great deal of space and is difficult to transport. Since Vietnam does not have big ships, a professional staff, or good preservation technology, the products will spoil after a short time.

 

To date, besides Vicem, which can export small volumes of cement every year, only Cam Pha Cement Company has successfully exported 15,000 tons to the Middle East.

 

Meanwhile, Vietnamese cement products have proven to be less competitive than the products provided by other countries. Cement producers been relying solely on domestic sales and don’t think much of exporting products.



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