Displaying items by tag: Vietnam

Vietnam: Vietnam's cement sales in 2012 reportedly fell by 3.5% to 54Mt due to low demand in the domestic market, according to the Vietnam Cement Association (VNCA). The country's cement sales in its domestic market fell by 7.71% year-on-year to 45.5Mt. Cement and clinker exports rose by 30% to 8.5Mt.

In 2012 local cement makers faced many difficulties such as large inventories and low domestic demand created by a static real estate market. High production costs, high lending interest rates and high input costs for materials such as fuel, power and coal all adversely affected local cement producers. Cement and clinker exports have also been disrupted due to some firms 'unfairly' cutting their export prices.

For 2013 the VNCA has predicted that local cement producers will continue to face difficulties. However the government has approved spending of US$480m on new rural constructions and will encourage the use of local cement for transportation infrastructure projects. Vietnam's domestic cement sales are predicted to rise by 5-8% year-on-year to 48-49Mt in 2013, equal to the total sales seen in 2011.

Deputy Minister of Construction Nguyen Tran Nam said that the local cement sector must focus on dealing with three main problems: export promotion, production cost reduction and enterprise restructure. He also called on local cement companies to cooperate on exports instead of undercutting each other.

Vietnam: Vietnam's Finance Ministry has announced that it will spend US$30-40m/yr on settling foreign debts for local cement producers until 2018. State-owned producers Dong Banh, Thai Nguyen, Tam Diep and Hoang Mai all receive preferential interest rates for domestic loans and guarantees for foreign loans. The total debt of these four projects is US$229m.

According to the ministry's recent report to the prime minister, the total amount of government-guaranteed loans reached US$1.37bn in 2011. Hoang Mai and Tam Diep have been given capital to pay back their loans. However, Tam Diep has had difficulties paying back its debts. Dong Banh and Thai Nguyen, which have been advanced capital for their first period of payment, still have troubles dealing with their foreign debt.

The Dong Banh cement plant, which has a total investment of US$61.4m, was forced to close in the first quarter of 2012 after two years in operation and a loss of US$9.44m. By 2018 the plant's debts with interest could reach US$28.8m. The Thai Nguyen cement plant suffered a loss of US$3.69m after one year and was still running at below 60% of its capacity. It must operate from 80% capacity to earn a profit. As of March 2012 Ha Long cement plant had incurred debts of about US$58.3m. Although the company borrowed US$96m to pay its debts, the company's liabilities for the period of 2012-15 still amounted to US$57.5m.

According to the Vietnam National Cement Association, local cement makers are predicted to continue facing a lot of difficulties as the real estate market remained gloomy with few signs for recovery. Exports are not seen as an effective solution to the problem as local cement producers cannot lower prices of their products any more to compete with foreign rivals. Analysts predict that a cement surplus will persist if the government does not take drastic measures including a demand stimulus and a review of current cement projects.

The outgoing chief executive of PPC (Portland Pretoria Cement) officer, Paul Stuiver, summed up the dilemma facing cement producers on the east coast of Africa. Building near the coast leaves you vulnerable to imports.

In a recent interview with the South African business weekly, 'Financial Mail', Stuiver said that imports are not a threat to African expansion, provided that a facility is not built within 200km of a port. Exactly the same issue was raised by Yves De Moor in his column in the November 2012 issue of Global Cement Magazine.

Countries along Africa's east coast receive imports, but Stuiver said that Africa's high logistics costs mean the prices increase steeply as the cement is transported inland. He commented that the markets in Mozambique and KwaZulu Natal in South Africa were especially vulnerable and that most imports to South Africa come through Durban. Unsurprisingly both of PPC's big recent investments have been in landlocked countries, Zimbabwe and Ethiopia respectively. In July 2012 it also tried to invest in CINAT, the Democratic Republic of Congo's state-owned cement producer.

The import issue to South Africa reignited last week when the South African National Regulator for Compulsory Specifications (NRCS) confirmed that it had confiscated 'sub-standard' cement imported from Vietnam. As we covered in August 2012 in this column this follows a row in July 2012 about whether cement from Pakistan's Lucky Cement was complying with South African standards.

Although standards still lead the argument, more honesty has emerged with the use of the word 'dumping' in the complaints. Stuiver explained that "...the price of cement from Pakistan, India and Vietnam is low because electricity, fuel and transport rates are subsidised." Whilst PPC can report that its revenue has risen by 9% to US$837m for the first nine months of 2012, complaints against foreign imports seem overly protective. In 2009 PPC confirmed the existence of a cartel in the country. PPC has even gone to the Advertising Standards Authority to stop imports with elephants on their bags!

With reports that Nigerian producer Dangote is building a new US$389m plant in South Africa, thoughts turn to what will happen once South Africa becomes 'self-sufficient' in cement, like Nigeria which has proudly announced this recently. Giant infrastructure projects are one way to use all that excess cement and this is what Lafarge WAPCO has been asking the Nigerian government to do recently, in a road building drive. Better transport links in South Africa would wreck Stuiver's maxim about not building near a port.

Two solutions from this week's news might appeal to the industry on the south and east coasts of Africa. The first is to use inventive export barriers just like the Bureau of Indian Standards have imposed to slow down exports from Pakistan. The second is to persuade importers to do what a North Korean ship reportedly did with its consignment of cement this week off the coast of Somalia: dump it in the sea.

Vietnam: Chen Liang-chuan, the Taiwanese founder of Taipei-based Lucky Cement, has had his US$160m Ninh Binh Cement plant in Vietnam thrown into doubt by the Vietnamese government changing its mind on a decision to award the plant limestone mining rights.

Liang-chuan has invested in the 4Mt/yr project since 2008 after being awarded the right by the local government to mine a 72-hectare limestone field for 49 years. The project was approved by Nguyen and related ministries. However, just as the plant's two new production lines were set to begin trial runs, the local Ninh Binh government rejected the request to begin exploiting the field, because it had designated the field part of the Trang An Scenic Landscape Complex. It plans to apply to UNESCO in September 2013 to have the complex recognised as a world heritage site.

Sources at Lucky Cement said that Vietnamese authorities were trying to find another limestone mine to replace the original field, but they were worried that a new mine location would entail additional transportation costs.

South Africa: The South African National Regulator for Compulsory Specifications (NRCS) has confiscated 'sub-standard' cement imported from Vietnam and is investigating complaints lodged about the quality of two other imported brands.

Daniel Ramarumo, a NRCS spokesman, confirmed that it had received complaints from NPC-Cimpor about Vietnamese cement, which was 'later confiscated by the regulator' in August 2012. The NRCS received a second complaint in September 2012 about Lucky Cement and had instituted an investigation. A third complaint from NPC-Cimpor was lodged on 5 November 2012 about Lucky Cement and Falcon Cement. He said that these complaints were currently under investigation.

PPC (Portland Pretoria Cement) chief executive Paul Stuiver commented that his company had tried to engage with the NRCS about allegedly inferior quality and underweight imports but was 'getting nowhere' because the NRCS had indicated it had tested the cement and it had complied with the standard. Stuiver now plans to raise the issue with the Economic Development Minister Ebrahim Patel.

Stuiver also added that one of the imported cement brands had an elephant on its bags, which resulted in PPC taking them to the Advertising Standards Authority and 'getting them stopped', as PPC also has an elephant on its bags.

Vietnam: Indonesian cement producer Semen Gresik has bought the Vietnamese cement company Thang Long Cement. The purchase was included in a conditional sales purchase agreement between Semen Gresik and Ha Noi General Export Import Joint Stock Company (Geleximco). Semen Gresik refused to state the value of the deal or the percentage of shares it had acquired.

"I am afraid we cannot mention it right now, but we are the majority. We will let you know in a month from now," said Dwi Sutjipto, Semen Gresik CEO. With the acquisition Semen Gresik hope to increase its market share and production capacity in Vietnam.

Thang Long Cement has a total production capacity of 2.3Mt/yr. Two new factories are expected to open soon, in the Quang Ninh and Binh Phuoc provinces, increasing the company's total capacity to 6.5Mt/yr.

The news this week that Vietnam's state-owned cement producer, Vicem, has made a first half profit 75% larger than that of the first half of 2011 is a surprising statistic from a country with so much spare cement.

The country has spent most of the past decade building cement plant after cement plant. According to research conducted for the April 2012 issue of Global Cement Magazine, Vietnam now has a cement capacity of over 70Mt/yr! Vicem says that it sold 9.7Mt of cement in the first six months of 2012 and reports that this level represents 44% of its intended production for the year. This makes its 2012 cement production target somewhere in the region of 22Mt.

How much of the non-Vicem cement capacity is being utilised in Vietnam is unknown, but it is certainly too much for Vietnam's current needs. When the country's own government owned cement producer announces that it expects to have 6Mt of cement stockpiled by the end of 2012 (enough to supply the UK for the whole of 2013), it is clear that there is a serious cement surplus. Oversupply has not been met by demand, cement prices are depressed and attempts to export, to countries both near and far, are on the up.

To help curb the problem, one cement plant project has been halted in the past week. The Kinh Bac City Development Share Holding Corp (KBC) has received permission from its state to not build its planned 5Mt/yr plant.

Halting new projects is one way for the country to reduce its overcapacity, but in the short term the industry is looking at exports. While its lengthly coastline makes getting cement to ports for export fairly straightforward, Vietnam is badly located to exploit its current situation in this way. It's proximity to China, which itself is starting to face an oversupply scenario despite its efficiency gains, leaves Vietnam at a cost disadvantage.

As well as there being China on Vietnam's doorstep, many other countries in the region, (Indonesia, Malaysia, Japan, South Korea, Philippines, etc), are also self-sufficient in terms of cement and are able to export extra capacity as necessary. Additionally, East Asian countries have often seen Africa as a good export market but the recent rise of Nigeria as a major producer may reduce this opportunity.

Amid all of these numbers the Vietnam News Brief Service commented that the current oversupply in the socialist state was down to the 'unplanned' construction of cement plants over recent years.

Vietnam: The state-run Vietnam Cement Industry Corporation (VICEM) has announced that it made a pre-tax profit of US$15.9m in the first half of 2012, a 73% year-on-year rise compared to the first half of 2011 and 44% of its whole-year target. Howver, its revenues fell by 1.2% year-on-year to US$682m during the same period.

Vicem reports that it sold 9.71Mt of cement and clinker in the first half of 2012, a 1.4% drop compared to the same period of 2011. Of the total 0.65Mt was exported, a 1.5% increase. Vicem produced 7.45Mt/yr of cement and 7.08Mt/yr of clinker between January and June 2012.

Meanwhile, a city authority has called a halt to the construction of a new cement plant amid continued overcapacity in Vietnam. Kinh Bac City Development Share Holding Corp (KBC) has received approval from authorities from the central province of Nghe An to withdraw from a cement plant project worth of hundreds of millions of US Dollars.

Construction of the Saigon-Tan Ky plant, which was planned to have a designed capacity of 5Mt/yr, was started on 19 May 2010 and it was expected to be developed in two phases. The production capacity for the first phase was projected to be 2500t/day (0.95Mt/yr). Investment for the first phase was proposed at US$71.8m. Local media has reported that the support structures for the three kiln plant have not yet been completed.

Vietnam had around 2.8Mt of cement in inventories by the end of June 2012 but the figure is expected to rise to as much as 6Mt by the end of the year. Local media reports that the overcapacity has been brought about through the 'unplanned construction of cement plants' in recent years.

Vietnam: Vietnam's Ministry of Construction has proposed the creation of an association for cement and clinker exporters to curb 'unhealthy' competition among them. The proposal has been sent to the prime minister for approval.

In its proposal the ministry said that Vietnam's cement and clinker exports have been 'badly affected' because some companies cut export prices to 'unfairly' compete with the rest. At present Vietnam has eight cement and clinker exporters. Six, Vicem, Ha Long, Thang Long, Cam Pha, The Vissai and Cong Thanh, are domestic. The remaining two, Chinfon and Phuc Son, are joint venture companies.

The ministry has called on local cement companies to cooperate rather than undercut each other in order to liquidate their large inventories through exports. The inventories are the biggest challenge facing the industry, it said. Exporting is considered a temporary measure to deal with the rising inventories which were caused by frozen real estate market and unplanned construction of cement factories nationwide.

Vietnam held around 2.8Mt of cement in inventories at the end of June 2012. The figure is expected to rise to 6Mt by the end of 2012, an increase of 23% on year-on-year.

Indonesia: PT Semen Gresik, Indonesia's largest cement producer, plans to spend US$400m-US$500m to expand its operation into Vietnam and Myanmar by the end of 2012, according to its general director Dwi Soetjipto.

Semen Gresik intends to finance 20% of the expansion with internal cash and the remainder with external sources, possibly from a global bonds issue. In case any negotiations conclude by the end of 2012, Semen Gresik would likely issue bonds in 2013, Dwi added.

The company has been assessing potential local partners for a joint venture for a plant in Myanmar to produce around 600,000t/yr, in which Semen Gresik will contribute US$150m. However, Dwi Soetjipto declined to discuss Vietnamese expansion plans in detail, hinting at an acquisition.

Semen Gresik reported total assets of US$2.25bn at the end of March 2012. The firm's revenues in the first quarter of 2012, rose by 20% year-on-year to US$458m. Its cement sales fell at 4.94Mt in Jan-Mar period, making up 39.3% of Indonesia's market share. Semen Gresik predicts that its cement sales will reach 22.5Mt/yr in 2012, up from 19.72Mt/yr in 2011. Revenues are expected to rise 15% year-on-year to US$1.93bn.