Oversupply forces cement producers to look abroad

Thursday, Feb 13, 2014 08:38

Workers of Dien Bien Cement Company in northern Dien Bien City load cement for export. Domestic producers are looking to overseas markets to offload excess supply. — VNA/VNS Photo Vu Sinh
HA NOI (Biz Hub) — Domestic cement producers this year will have to give priority to developing exports as supply still exceeds demand and the domestic market outlook remains grim, industry insiders have said.

According to the Ministry of Construction, the country's total cement output last year was more than 70 million tonnes, while it sold roughly 61 million tonnes of cement at home and abroad, up 14 per cent against the previous year.

Supply sources are expected to be higher as five additional cement production lines with a total designed capacity of more than 7 million tonnes per year are due to be put into operation in the second half of this year.

Although the domestic construction material market has, in recent months, showed slight recovery signs after two years of sluggishness, significant improvements in purchasing power cannot be expected.

Cement producers have also faced major challenges as the real estate market has not rebounded significantly, while input costs are rising. Producers find it difficult to access bank loans as interest rates have remained high.

Tran Viet Thang, director of the country's largest cement producer Vicem, said that most of the country's cement plants had to seek foreign loans to invest in the business and are still paying off these debts. Due to the 2-per cent exchange rate fluctuations last year, cement producers suffered a loss.

Dao Ngoc Binh from Vicem Hoang Thach, a subsidiary of Vicem in central Nghe An Province, noted that due to the fierce competition in the domestic market, many cement producers have promoted exports.

Thang claimed that the country's cement exports last year reached more than 14 million tonnes, the highest ever recorded.

Southeast Asia and the Middle East are the two main markets for Viet Nam's cement, while Malaysia and Indonesia are the nation's largest importers of cement in the Southeast Asian region.

The added focus on exports also has an eye on long-term business success, given that Viet Nam is part of the Trans-Pacific Partnership (TPP) that is currently in force.

Many industry insiders are hoping the TPP can help ameliorate the situation by boosting exports.

Chairman of the Viet Nam Steel Association Pham Chi Cuong pointed out that with the TPP agreement, the domestic construction material industry will be able to sell more products, while they can import better products at reasonable prices.

He said that most Vietnamese construction materials are of average quality, but even these are needed in some countries. These countries would have to drop their import tariffs under the TPP, creating an opportunity for Vietnamese firms.

However, economist Tran Minh Hai of the HCM City National University stressed the need for the domestic construction material producers to come up with effective export strategies, adding that focus should be put on pricing, quality and sales promotion. — VNS

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