Sector’s feet stuck in cement

illustration photo

>> Cement producers feel a weighty burden

According to the latest data of the Ministry of Construction (MoC), Vietnam sold over 44 million tonnes of cement in 2011.

The data shows that the domestic cement producers will struggle to bet last year’s 50 million tonnes of consumption. Many companies have sold at discounts, but failed to boost consumption.

Some like Dong Banh cement factory in northern Lang Son province faces stopping production and shutting down.

Vu Van Nam, board chairman of Dong Banh, said measures were needed to lift manufacturing operations into the New Year.

High inflation, lending interest rates and cuts to public investment are pushing firms into a corner. Additionally, most cement projects were invested with loans so repayment is investor’s big burden.

In the most recent meeting with the cement industry, a Ministry of Finance representative said rising production and sales figures would not mean firms were running at profits since the sector’s return on equity rate remains low of less than 9 per cent only.

Vietnam’s state-run cement conglomerate Vicem is facing heavy losses of over VND230 billion ($10.9 million) from the beginning of the year after a dip in the country’s cement consumption. Vicem’s market share fell from 40 to 36 per cent.

A Vicem representative said: “With current low profit rates, it is difficult for cement producers to convince banks to loosen the pulse-rings.”

“Rising production costs, poor ranges of products especially the lack of specialised cement products are hurting Vicem operations,” said Vice Minister of Construction Nguyen Tran Nam.

“Boosting consumption and loan repayment will still be big problems for cement companies in the coming period in the face of current credit squeezes,” said Nam of Dong Banh Cement.