Cement inventories pile up

31-May-2012 Intellasia | VIR | 7:01 AM Print This Post

The cement industry failed to sell 3.5 million tonnes by the end of May though production output dropped 17 per cent to 19 million tonnes, according to the Vietnam Cement Association.

The association’s general secretary Do Duc Oanh said that high inventory was currently the biggest issue of the cement industry. The country’s cement output this year is expected to reach 60-62 million tonnes while domestic consumption is estimated to hit around 47-48 million tonnes. With roughly 7-8 million tonnes of cement expected to be exported this year, the industry will retain roughly 6 million tonnes of unsold cement.

Industry insiders attributed the abundance to rampant investment over the past years. The country currently has more than 100 cement plants with a total design capacity of 70 million tonnes.

Due to large inventories, cement producers have had to cut their sales prices despite a high rise in input costs, which has pushed them into financial trouble.

Director of the Ministry of Construction’s Building Material Department Le Van Toi said that cement producers were faced with major financial hardship as they could not raise sales prices while input costs rose sharply. Coal prices, for example, surged 170 per cent over last year. The rising figures for power and oil were 19 and 40 per cent.

The situation was even worse as most cement producers depended on bank loans while lending interest rates remained high.

Oanh said that most of producers suffered losses this year and several, including Thanh Liem Cement and Ang Son Cement, even had to stop operating.

To help cement producers overcome challenges, the association recommended the government to restructure repayment periods for foreign and domestic loans.

The association also asked the government to reduce value added tax to 5 per cent to ease financial hardships.

Besides measures to boost cement consumption, Oanh said the government should decide whether to extend, postpone or even stop the construction of new cement projects to avoid a higher inventory.

If the industry’s development plans were not considered carefully, the country would continue struggling with surplus stock, he said.

The Ministry of Construction recently announced that five out of eight cement plant projects, with a total designed capacity of 7.57 million tonnes, have not been put into operation as proposed under the governments’ cement-industry development plan for 2011-20.

The five projects include the Trung Son plant in Hoa Binh with a capacity of 0.91 million tonnes, He Duong II in Ninh Binh with a capacity of 1.8 million tonnes, Ngoc Ha in Ha Giang with a capacity of 0.6 million tonnes, Dong Lam in Thua Thien – Hue with a capacity of 1.8 million tonnes and Vinafuji in Lao Cai with a capacity of 0.6 million tonnes.

 


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