Although the domestic cement sector has yet to be able to solve its oversupply problem, a number of new cement plants are expected to become operational this year.

At the Ha Tien cement manufacturing plant, Photo: Tuoi Tre

According to Nguyen Van Thien, chairman of the Vietnam Cement Association, if the cement projects that are under construction can meet their deadlines, the country this year will welcome seven to eight more cement manufacturing plants with a total design capacity of 7 million tons a year.

These projects all belong in the cement industry development plan that has been approved by the government, Thien told Tuoi Tre.

“[The new projects] will raise the total supply of the cement sector to 60 million tons, far more than the real demand of less than 10 million tons,” Thien said.

“In terms of design capacity, the industry’s production capacity will be 77 million tons a year, exceeding the actual consumption capacity of only 50 million tons.”

For his part, Phan Dinh Quang, head of marketing of Fico Tay Ninh JSC, said the additional plants will exacerbate the already tough situation facing the cement sector.

“Cement manufacturers will face heavier competitive pressure,” Quang lamented.

Low consumption; exports eyed

Meanwhile, the cement manufacturing industry is still struggling to solve the problem of low consumption.

Thien of VNCA said total consumption last year was only 49.5 million tons, down by nearly 1 million tons against 2010.

“We also have a pessimistic outlook on the figure this year, which is expected to be less than 50 million tons,” Thien said.

Nguyen Van Trung, CEO of Fico Tay Ninh, confirmed that 2011 was a hard year for the cement manufacturers.

Trung said the tightened credit policy targeting the real estate sector and the government’s cutting of public spending are the main causes for the sector’s low consumption.

“Such a situation is likely to repeat itself this year, with the difficulties expected to be even more unpredictable,” Trung stated.

With such a stiff challenge facing them, Quang said many cement manufacturers have considered exporting their products.

However, Quang said that export prices are only around US$56 – 68 a ton, due to tough competition from Thai and Chinese rivals.

“Such prices will result in poor business effectiveness given the expenses spent for exports,” he said, adding that the export effectiveness is even lower than selling the product domestically.

The CEO of a subsidiary of the state-run Vietnam Cement Industry Corporation also said exporting cement is just “a temporary solution.”

His company last year exported 100,000 tons to Cambodia, he said.

He said the domestic cement industry cannot compete with its Chinese, Thai, and Indonesian counterparts since the latter all have had their production lines reach complete depreciation.

“Meanwhile, Vietnamese manufacturers are still burdened by clearing bank interests, making their cost prices much higher.”

Industry insiders also said cement exports should not be encouraged, since it brings in low value and poor effectiveness.

Source: Tuoitrenews