Cement firms told to boost demand

Monday, Jan 18, 2016 08:11

This year, Vicem has set a target of producing 17 million tonnes of clinker and 22 million tonnes of cement. — Photo doanhnhansaigon

HA NOI (Biz Hub) — General Director of the Viet Nam Cement Industry Corporation (VICEM) Tran Viet Thang has asked member cement companies to boost domestic consumption by at least 10 per cent this year.

Thang also required them to focus on increasing cement consumption in key markets and localities which have advantages in transportation, while maintaining export targets to support the domestic market.

Sharp decline

Last year, exports of Vietnamese cement and clinker saw a sharp decline due to direct competitive prices from countries with large production volumes including China, Thailand, and Indonesia, thus leading to more fierce competition in the local market.

Cement production is much higher than demand. Total cement supply in the local market reached about 81 million tonnes while cement consumption demand was only about 53.18 million tonnes with an increase of 9.1 per cent against 2014, leaving a surplus of 30 million tonnes. As a result, cement producers had to reschedule or stop production.

To regulate and stabilise the local cement market, VICEM obtained a highest consumption growth rate of 19.16 million tonnes or rose 10.6 times against 2014. The joint-venture cement makers gained 15.57 per cent with an increase of 9 per cent and other cement producers received 18.44 million tonnes, up 7.8 per cent.

Previously, Tam Diep and Vicem Hai Phong cement plants, both suffered from losses. In 2015, they started generating profits and the existing problems in production and business were already handled to make a sustainable development in the future. Other companies including Vicem Ha Tien, Vicem Hoang Thach, Vicem Bim Son, and Vicem But Son, in addition to Vicem Hoang Mai, also saw good business result in 2015.

Specifically, Vicem marked a successful business plan in 2015 with its profit double that of 2014.

Higher costs

General Director Thang said that if the central bank adjusts the exchange rate or devalues the Vietnamese dong it makes things very difficult for the cement industry. As a result, exports become extremely difficult. If Chinese yuan reduced US$10 per tonnes for clinker, leaving a surplus of 400 million tonnes of cement in the domestic market, it would have a negative influence on production goals in 2016.

As a result, Vicem had to minimise input costs leading to higher variable costs. If export price is lower than the variable cost, cement makers have to stop production.

To deal with problem, Thang has asked cement companies to try reducing clinker inventories. And cement makers were asked not to adjust their profit by reducing the income of workers. Cement makers have to seek their own way to increase the incomes of their workers, according to Thang.

Under its plan, Vicem will continue to implement restructuring two loss-making cement producers. They are the Ha Long and Song Thao cement plants. Vicem will also make asset valuation of these two plants and soon submit it to the Ministry of Construction for approval.

This year, Vicem has set a target of producing 17 million tonnes of clinker and 22 million tonnes of cement. Consumption of cement and clinker is expected to reach 24 million tonnes, bringing a revenue of VND33 trillion ($1.44 billion) with a profit before tax of VND1.8 trillion ($78.6 million). — VNS

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