SCG not giving up Vietnam cement plan despite oversupply

Nikkei Asian Review recently quoted SCG’s president and CEO Roongrote Rangsiyopash as saying that a joint venture or merger with an existing plant would be the best way to enter the Vietnamese market because of the country’s excess capacity.

Earlier, in January, Dhep Vongvanich, SCG Vietnam’s executive director, said SCG would have another plant in Vietnam, but could not say when. In March 2012, SCG officially started operation of Buu Long Industry & Investment Joint Stock Company (Buu Long I&I JSC). SCG Cement acquired 99% equity of the company in the fourth quarter of 2011.

SCG has plants in Cambodia and Indonesia, and the company is starting production at plants in Myanmar in the third quarter of 2016 and Laos in mid-2017.

According to industry insiders, Vietnam’s cement output is estimated at 81.56 million tonnes, while the consumption in 2016 is estimated at between 75 and 77 million tones, presenting an oversupply. Later this year, Song Lam cement producing plant, with the annual capacity of four million tonnes, is going to open, which is expected to intensify competition amongst domestic cement manufacturers.

“But public and private construction projects are expected to increase, given projections from the World Bank that Vietnam’s gross domestic product will grow at more than 6 per cent for the next three years,” said Chaovalit Ekabut, SCG’s chief financial officer.

Meanwhile, another cement giant - LafargeHolcim Group, a joint venture between Swiss Holcim Ltd. and French Lafarge Group – is restructuring its business in Vietnam due to the domestic oversupply.

LafargeHolcim is currently the largest multinational cement producing company in the world by installed capacity. In Vietnam LafargeHolcim has five cement plants and eight ready mixed concrete plants, with an annual capacity of six million tonnes of cement and one million cubic meters of concrete per year, and is the largest foreign-invested cement producing company in Vietnam.

Holcim Vietnam presently holds a 26 per cent of domestic market share, while Lafarge Vietnam takes another 12 per cent, with their main products being cement, concrete, and aggregates.

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