Headwinds exacerbate cement sector woes
Headwinds exacerbate cement sector woes
Figures from the Ministry of Construction show that total cement production output is expected to reach 44 million tonnes for the first half of the year, similar to that of the same period last year.
Several cement plants have been reportedly running at 70-75 per cent capacity, with the industry sitting on a stockpile approximating five million tonnes.
The sector’s total designed capacity surpasses 120 million tonnes per year, and four new production lines with a combined capacity of over 11 million tonnes have yet to be put into operation due to the current situation.
In Q1 this year, Vicem Ha Tien, a member of the state conglomerate Vietnam Cement Industry Corporation (Vicem), saw a 12 per cent drop in its revenue on-year, falling to $62.3 million, with its post-tax profit contracting by more than $1.04 million.
Similarly, Bim Son Cement saw an 18.6 per cent drop in its net revenue, falling to 28.7 million with over $2 million in losses, marking its seventh consecutive loss-making quarter since Q3 of 2022.
Vicem But Son also counted losses of $2.3 million in Q1, marking its sixth consecutive loss-making quarter.
At a conference on how best to address the challenges in the cement, steel, iron, and other building materials' industries chaired by Prime Minister Pham Minh Chinh on June 15, Deputy Minister of Construction (MoC) Nguyen Van Sinh revealed that many cement producers are struggling due to borrowing, soaring production costs, and slow consumption.
Sinh proposed the PM and State Bank of Vietnam make policy adjustments related to debt extension and lowering the lending rates of loans of cement and building material firms to suit their current capacity to fulfill these obligations.
The MoC representative also proposed the PM and the Ministry of Finance revise the tax policy to ensure competitive advantages with other cement-exporting countries, for instance reducing the current clinker export tariff from 10 per cent to zero per cent.
Nguyen Quang Cung, chairman of the Vietnam Cement Association, suggested that to stimulate cement consumption, it is necessary to encourage the use of cement in motorway and viaduct construction in regions with weak soils such as the Mekong delta and several areas in Vietnam’s central and mountainous regions.
"It is also important to reinforce road surfaces by using cement instead of using soil and gravel as by traditional technology to increase the project durability," said Cung.
"Never before has the cement industry been at such a critical stage. If the current predicament drags on, the possibility of domestic ownership transferring to foreign investors might occur, posing the threat of the cement sector falling into the hands of foreign businesses, thereby reducing the country's ability to deal with pricing and market moderation in the long term," Cung added.
