12-9 cement project between rock and hard place

In 2009 the company started a complete overhaul on the existing facility to update technology an increase the capacity to 550,000 tonnes per year. It was expected to restart operations in 2011, which never happened, and since last year, no activity has been seen at the site.

To date, total capital poured into the project comes to VND1.1 trillion ($52.3 million), after an initial investment of VND814 billion ($38.76 million).

Nguyen Dang Tinh, director of the 12-9 PetroVietnam Cement Joint Stock Company said they are trying to maintain production with old Chinese technologies at other plants while continuing to expand the Nghe An facility, but that the company wasn’t operating efficiently enough and was short of financing.

Its workers haven’t been paid since February, the plants are running at below capacity, and they are only open for production about half of every month.

Tinh said “Currently it is hard to mobilise the capital needed for the project.”

In May this year, state-run National Oil and Gas Group (PVN), the mother company of 12-9, joined provincial leaders and the local credit association to discuss solutions for the project. Nothing has yet been announced.

Tinh added that some lenders had approved funds for the project at a rate of 9 per cent a year. But the company’s margins could only sustain 7 per cent.

To find solutions for the project, Deputy Prime Minister Hoang Trung Hai asked the investor to review the project and come up with solutions for the government to consider.

“We are trying to find partners to help the project move forward,” Tinh said.

However, given the doldrums of the local cement industry, 12-9 may have a hard time finding a partner with strong enough financial resources and the willingness to invest.

The oversupply is the result of the fast growth of cement manufacturing in recent years to supply the real estate market, which then crashed. Vietnam has 106 cement factories with a total annual output of 63 million tonnes.