Cement sector has its feet stuck

The cement industry’s total production capacity was 67 million tonnes in 2011. However, domestic consumption was just 49.1 million tonnes, down one million tonnes against 2010 with many factories under capacity.

Ministry of Construction’s Building Materials Department head Le Van Toi, in a talk with VIR in early 2012, was quoted as saying “supply outrunning demands is now visible in the cement industry”.

In light of Vietnam’s cement industry development plan during 2005-2010, with a vision towards 2020 cement consumption demand was put at 46.8 million in 2010, hiking to 62.5 million by 2015 and from 68-70 million tonnes by 2020.

At this time, cement sector’s surplus amount goes far beyond around three million tonnes as seen in 2009.

This year total cement consumption is forecast to be around 56 million tonnes versus an estimated production output of 67 million tonnes against total production capacity of 72 million tonnes. This will result in over 10 million tonnes surplus amount.

Huge cement output against sinking consumption has inevitably led to escalating inventory levels at cement firms.

Ministry of Industry and Trade figures show that unsold stock surged 51.3 per cent in the first 10 months of 2012 at an estimated four million tonnes with 1.4 million tonnes alone coming from state cement conglomerate Vicem.

Ministry of Finance figures reflecting inspection outcomes in 17 cement projects using loans with the government acting as underwriter show that in early April, 2012 cement inventory value at 16 projects came to VND1.988 trillion ($94.6 million).

A bunch of factors have involved why the supply outran the demand in the cement sector.
Objectively, global economic downturn, slashing public investments, tightening credit and property market doldrums were to blame.  

Subjectively, production capacity far outstrips the demand as stated above.

According to a Vicem source, albeit occupying 34 per cent market share and playing a decisive role in stabilising local cement market they never have a say in the cement sector development planning’s outlining process.