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Vietnam’s cement companies expect hardship in last 6 months of 2022

Vietnam’s cement companies expect hardship in last 6 months of 2022

Tuesday 12, 07 2022
The increasing input material price is putting pressure on cement companies in Vietnam. Export, a channel that is expected to be an important consumption channel, is also projecting a grim outlook.

High input material price

Companies and contractors in Vietnam are currently under the pressure of input material prices. Steel prices rise high by more than 35%. In addition, prices of cement, brick, glass, aluminum, etc., are all increasing uncontrollably, pushing construction companies and contractors to the risk of heavy profit loss.

construction industry

Vietnam’s construction industry, specifically the construction material sector, has undergone a period of hardship due to COVID-19 and is now facing more difficulties because of the Russia – Ukraine conflict. The unstable factors of global geopolitics, natural disasters, etc., have yet to subside, affecting the prices of building materials in general and cement in particular.

Vietnam’s cement companies achieved quite bleak business results. The increase in the price of input materials along with the competition in the market has caused the profit margin of cement enterprises to decline.

Specifically, Ha Tien 1 Cement Joint Stock Company - the leading unit in the cement market share in the South, stated that soaring raw material and fuel prices eroded the unit's business performance. Their profit decreased by 74% over the same period last year, and the lowest result since the first quarter of 2018. The gross profit margin also narrowed from 13.7% to 8%.

The Vietnam Cement Association (VNCA) said that the domestic cement selling price is still having a big difference by region and is expected to continue to increase in the coming time.

VNDirect

According to VNDirect, Vietnam's cement industry is in a state of both surplus and shortage when the current domestic cement demand is less than 65 million tons. On the other hand, the industry's capacity scale has reached nearly 107 million tons. The oversupply occurs especially in Northern Vietnam and is increasingly dependent on exports.

Exports outlook is grim

According to data from the General Statistics Office, in the first 6 months of 2022, Vietnam’s exports of cement and clinker reached about 16.2 million tons, equivalent to 740 million USD, down 22% in volume and 7.7% in turnover over the same period in 2021.

China and the Philippines remained Vietnam’s two major cement and clinker exporting markets. However, the amount imported by these markets was down in the first half of 2022.

Exports pointed out that exports to China decreased due to this country’s continuing the “Zero COVID” policy. In addition, its real estate market is declining, leading to a plummet in cement consumption.

Vietnam’s second-largest cement export market, the Philippines, is also affected by difficult shipping and high freight rates.

With such obstacles remaining, cement exports to these 2 markets will face many difficulties in the remainder of 2022, especially exports to China.

The problem of efficiency in cement companies is also concerning. According to the Vietnam Cement Corporation, in October 2020, the type of coal that VICEM still uses costs only 50-60 USD / ton, but at times like now, the price is up to 490 USD / ton - an increase of 8 times. It will be hard for companies to gain any profit when using such high price coal to fuel clinker grinders.

Vietnam’s average export

In general, Vietnam’s average export price of cement and clinker in the past 6 months reached 45.5 USD/ton, an estimated increase of 15% over the same period.  However, the above export price increase is still low if the increase in input costs is taken into account. Specifically, coal has increased by nearly 500 USD/ton as of May 2022, compared to the price of 75-80 USD/ton at the end of 2020.

In 2022, cement supply will remain high, at about 108 million tons, while domestic consumption is expected to be about 65 million tons.

Therefore, export continues to be a vital consumption channel for cement-producing enterprises. However, as mentioned, exports also pose many challenges for cement companies in Vietnam.

 

Compiled by VietnamCredit

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