Cement market gloomy as consumption experiences decline

08-Jun-2012 Intellasia | Bao dau tu | 11:04 AM Print This Post

Cement inventories have now surged to the record high of 3.5 million tonnes whereas first five-month consumption has experienced a 10 percent year-on-year decrease over 2011 standing at 19 million tonnes. Almost all cement companies appear fairly sceptical about the future cement industry outlook.

Despite the current stable market in Nghe An, Hoang Mai Cement JSC – a member of Vietnam Cement Corporation (Vicem) expressed extreme concern regarding the cement consumption in June and months to come. Cement consumption reached nearly 600,000 tonnes over the first five months in comparison with the year target of 1.4 – 1.45 million tonnes, which is relatively encouraging over other peers, according to Dang Tang Cuong, deputy general director. Yet, several new entrants in this area such as cement grinding station with capacity of 1 million tonnes annually in Tinh Gia (Thanh Hoa) of Cong Thanh Cement JSC, Petroleum Cement JSC, Do Luong Cement JSC are likely to pose significant threat to their business, said Cuong. In all likelihood, these new comers will probably offer attractive prices as well as sale programmes luring customers away from their existing suppliers. What is more, the period between May and July is rainy season when normally witnesses low consumption.

The cement industry’s design capacity and production output are expected to reach 70 million tonnes, 60 – 62 million tonnes respectively for the year 2012. In the meantime, domestic consumption is forecast to stand at 47 – 48 million tonnes, export turnover 7 – 8 million tonnes, yet some 6 million tonnes in excess.

Holcim, a reputable cement brand name in the local market, saw five-month consumption of 1.2 million tonnes versus the year goal of 3.8 tonnes. Revenue for this year would, therefore, be much lower than that in the two preceding years and target profit of 100 billion dong may be beyond reach, according to Quan Trong Dan, deputy general director.

Similarly, Ngo Duc Luu, deputy director of vicem But Son (Ninh Binh) doubted the possibility of meeting the year goal of 3.6 million tonnes as getting rid of 1.8 million tonnes within the last seven months would almost be impossible mission.

Hardship is very likely to persist until 2014-2015 for the whole industry due to continued expanding supply, predicted Dang Tang Cuong. In addition, inflation control along with monetary tightening, public investment reduction and the like has hit cement consumption let alone existing investment debts of 80pct of cement producers.

Apparently, the single solution for inventory release and debt settlement for the time being should be exporting. Nonetheless, the sector has yet fulfilled the exporting goal by far. Assuming that this year’s export turnover target of 7 – 8 million tonnes is met and cement supply keeps surging, some 6 tonnes of excessive cement would still remain presenting significant challenges to the industry.


Category: Business

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