Higher input costs hit steel and cement producers

24-Mar-2012 Intellasia | The Saigon Times Daily | 7:01 AM Print This Post

Surging input costs of oil and coal are making inroads into the steel and cement industries that have already been struggling with poor sales since early this year.

Nguyen Van Thien, chair of the Vietnam Cement Association, told the Daily that a 10 percent coal price rise last month and the recent fuel price hike were putting great pressure on cement manufacturers.

The higher coal and fuel prices have led cement production costs to soar by VND35,000 per tonne while the cement selling price cannot be adjusted up due to low demand, Thien said.

The country’s cement consumption, he said, has reached a mere 10 million tonnes in the year to date, representing 80 percent of the volume recorded in the same period last year. “Enterprises are suffering losses caused by the rising production cost. Raising the selling price will be our last resort.”

Meanwhile, the manufacturer needs 35-40 kilos of heavy fuel oil to make one tonne of steel, so the VND2,000/kilo increase in the heavy fuel oil price has sent the steel production cost going up by VND70,000-80,000 a tonne, said Nguyen Tien Nghi, vice chair of the Vietnam Steel Association.

Nghi told the Daily that some steel producers in the country’s north had now switched to coal from fuel oil to cope with the cost spike. However, companies in the industry are concerned about a possible coal price rise in the future, he added.

The steel association has asked sales agents to stock up on steel to prepare for the upcoming construction season. Steel consumption this month is projected to amount to over 400,000 tonnes, up from some 390,000 tonnes in the previous month.


Category: Business

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