VietNamNet Bridge – Vietnamese cement manufacturers have been doing a great deal of harm to each other when they try to lower the export prices to scramble for clients.
The cement volume sold in the first six months of the year saw a 10 percent decrease in comparison with the same period of the last year. The oversupply has prompted cement companies to boost exports to earn money and clear the inventories.
In order to boost exports, a lot of cement manufacturers have to accept to slash the export prices. Vietnam’s cement export prices are now 10 percent on average lower than the prices offered by other regional exporters.
The fact that Vietnamese enterprises accept to export clinker and cement at low prices has given foreign importers a reason to force the prices down further. Since some cement manufacturers have slashed the export prices, others have to follow the move, or they would not be able to sell products. As a result, cement enterprises all have reported bad business results.
According to the Ministry of Construction, in the first six months of 2012, Vietnam exported 3.2 million tons of cement and clinker, much lower than the targeted export volume of 7-8 million tons this year.
Cement manufacturers still believe that the modest export volume still should be seen as an encouraging result, because the exports have helped a lot in reducing the inventories, while only 23.8 million tons cement were consumed domestically in the last six months.
Nevertheless, the Ministry of Construction has pointed out that lowering the export prices must not be seen as a right track for cement manufacturers to follow, because this cannot bring profits to them and does not ensure the sustainable growth. While the input material prices all have increased sharply (the coal price has increased by 170 percent, electricity by 19 percent and oil by 40 percent), it is really unreasonable to slash the export prices.
Nguyen Van Thien, Chair of the Vietnam Cement Association VNCA, has pointed out that the cement manufacturers’ problems are not only the common ones existing in the national economy, but also the lack of cooperation among them.
Thien said that in principle, the cooperation would help push up the production and the sales, both in the domestic and foreign markets. However, they still cannot have a common voice for mutual benefits.
VNCA, in an effort to establish the close cooperation among cement manufacturers, has gathered the managers of the cement plants to discuss the cooperation methods to ease the current difficulties.
VNCA has suggested that the cement plants in the northern, central and southern regions should appoint an enterprise, which is powerful and prestigious enough, to act as the leader in the market and step by step, organize an institutional market.
The current export prices of 36 dollars per ton of clinker and 50 dollars per ton of cement would make enterprises take profit, because the prices cannot cover the expenses. Therefore, VNCA believes that enterprises should join forces to raise the FOB (free on board) clinker price to 40 dollars per ton at minimum.
An executive of Fico Tay Ninh Cement Plant also said that the current export prices would not bring the turnover high enough for enterprises “to live.”
However, Deputy Director of Vicem But Son cement company Ngo Duc Luu, has warned that it would be impossible to call for the enterprises’ cooperation in pricing cement products, except the subsidiaries of the Vietnam Cement Corporation.