Cement companies in Vietnam have been in recovery in the first four months of 2021. The Building Materials Department (under the Ministry of Construction) reported that in the first four months of 2021, the estimated consumption of cement products was about 34.58 million tons, increased by 16.5% compared with the same period of 2020. Domestic cement product consumption accounted for about 19.44 million tons, which was not a notable increase compared with the consumption in the first four months of 2020. However, the export volume until April of 2021 came up to around 15.14 million tons, which was a rise of 65% compared to the same period last year.
In April, the cement products consumption was about 10.41 million tons, which was around 6% more than the consumption in April of 2020. Specifically, domestic consumption makes up for about 5.91 million tons and export about 4.5 million tons. Cement price domestically raised by around 35.000 VND a ton in April, higher than in March. Cement export price in April also witnesses a slight increase compared to March.
According to the Vietnam Cement Association (VNCA), from the second quarter of 2021 onwards, the prediction for the Vietnam cement market is positive with stable, continuous growth and development. However, to achieve this goal, cement companies in Vietnam need to deal with challenges that are hindering the growth of cement production.
Specifically, the domestic cement consumption is still low, with a trend of stopping at under 65 million tons a year in the last three years. This fact proves that the domestic cement market is coming close to saturation. According to analysis and forecasts from experts in the construction materials field, the profit margin of the cement industry may continue to decline due to increased capacity and fuel costs. In addition, the export volume of cement and clinker products, though increases in the first four months of 2021, is unstable with potential risks. The export volume of cement products in 2021 is expected to remain stable due to high demand from China; however, the Chinese domestic supply is stabilizing. Therefore, exporting to this market will be difficult.
VNCA stated that currently, Vietnam’s cement production ranks third worldwide and first in terms of exports. Due to competition pressure, many markets worldwide have increased safeguard taxes to protect their cement industry. Specifically, the Philippines imposed an import tax of about 5% of the selling price, or Bangladesh applied an additional 8% to VAT. There are countries such as Indonesia, Turkey, and countries in the Middle East that have higher production costs than Vietnam but still decrease cement selling price to gain export market share. In the coming years, the trend for cement companies over the world will turn to compete in export.
According to Mr. Nguyen Quang Cung – President of VNCA, competitive pressure is taking place in domestic and export markets. Accordingly, cement companies need to adapt and find ways to overcome these pressures. Mr. Cung proposed that there should be a solution for the cement industry to stimulate domestic consumption.
As for the export market, with the increasingly fierce competition pressure, Mr. Cung suggested that the cement industry should gradually shift to potential markets such as the US, Israel, etc. Cement export prices in these markets will be higher since these countries do not invest in the development of cement both now and the future.
By the end of April 2021, the COVID-19 pandemic in Vietnam had generally been under control, which led to the reopening of real estate and construction projects. The economy, in general, is in the process of recovery, and the production and consumption of cement products are expected to increase. The Government is promoting the development of infrastructure for the country, specifically transport infrastructure, construction in urban areas, the North-South expressway, construction of belt roads in big cities, etc. Hence, the construction industry will experience better growth in the period from 2021 to 2025. Consequently, cement consumption will also increase significantly, which will create opportunities for cement companies.
Compiled by VietnamCredit