Vietnam’s cement exports going downhill have been predicted for several months prior.
Data from the Building Materials Department shows that, in September, the estimated consumption of cement products was only about 7.6 million tons. That number decreased by about 1.26 million tons compared to the previous month and about 15% compared to the same period in 2021.
Specifically, domestic cement consumption is about 5.4 million tons, with Vicem consuming about 1.5 million tons. Exports are estimated at 2.2 million tons.
In the first nine months of 2022, the consumption of cement products is estimated at only 72.93 million tons, down about 10% compared to the same period in 2021.
Specifically, domestic cement consumption was about 47.31 million tons, thus increasing by 5% over the same period in 2021. However, exports decreased sharply by about 28%. Cement exports were estimated at 24.71 million tons.
In recent years, oversupply and dependence on export have been the reality of Vietnam's cement industry. With an annual production capacity of over 100 million tons in the last 2 years, while the domestic market only absorbs more than 60 million tons, a large amount of cement and clinker relies on export channels.
Chairman of the Vietnam Cement Association (VNCA), Mr. Nguyen Quang Cung, admitted that the primary challenge of the cement industry currently is the imbalance of supply - demand. Specifically, the total current design capacity of the cement industry is 107 million tons, and domestic consumption in recent years has not increased. It even tended to go in a downward direction.
After setting a record of exporting nearly 46 million tons of cement in 2021, Vietnam's cement exports in recent months have plummeted. The reason being China, the primary clinker import market, reduced imports due to the implementation of the Zero-Covid policy. Meanwhile, the second largest market, the Philippines, is affected by difficulties in shipping and high freight rates, along with an anti-dumping tax of over 10% applied to cement imported from Vietnam.
The downward export trend makes Vietnam's cement producers very concerned, especially in the context of a sharp increase in the cost of clinker production. Currently, the inventory in Vietnam is approximately 6 million tons of raw materials, mainly clinker, equivalent to 25-30 days of production.
In 2022, the cement supply remains high, at about 107 million tons. With such a large output, businesses will face inventory problems when exports decline, leading to limited cash flow.
Oversupply and intense competition in the cement industry will continue in 2023.
VNDIRECT Securities Joint Stock Company said that Vietnam's cement industry is in a state of both surplus and shortage. There is an oversupply of cement when production capacity exceeds domestic market demand and a shortage of large-scale cement plants.
Recently, the fourth cement line under Long Son Cement Factory has been put into operation, adding about 2.5 million tons of cement per year. It is worth mentioning that this project is based in Thanh Hoa - a province already overwhelmed with many large cement factories, increasing the scale of cement capacity in this province to nearly 30 million tons/year.
Mr. Pham Duc Trung, Deputy General Director of Nghi Son Cement Company (Thanh Hoa), acknowledged that with the current large capacity scale, the domestic market is limited, and the cement industry still has to focus on exploiting more natural resources and new export markets.
However, Mr. Trung also admitted that exports would face many difficulties when the policies in each country are different, and many markets apply technical barriers to limit imports.
Another problem Vietnam's cement industry will be facing this year and 2023 is that it will be more difficult to export because countries importing cement and clinker continue to implement many protectionist measures for domestic cement production, applying different commercial technical barriers, high freight rates, etc.
In addition, according to Decree No. 101/2021/ND-CP, amending and supplementing several articles of Decree No. 122/2016/ND-CP and Decree No. 57/2020/ND-CP, the export tax will increase from 5% to 10% to limit the export of non-renewable resources.
When taxes increase, export prices will be more expensive, so importing countries have to calculate more to choose which country to import.
Compiled by VietnamCredit