Cement Market Needs Stabilisation

Cement Market Needs Stabilisation

Vietnam's cement industry has undergone over 100 years of development. The revenue makes up 9-11 per cent of the industrial GDP. Due to sudden rise in demand, the cement market often experienced through "fever".  The government and related agencies are seeking measures to stabilise the market.

Price hike ahead?

According to the Ministry of Construction, cement consumption is seasonal; more is used in the second and fourth quarters and less in the first and third quarters. Furthermore, as the materials for cement production such as limestone and clay are mainly found in North Vietnam, while the demand is only 43-45 per cent in North Vietnam, 38-40 per cent in South Vietnam and 15-17 per cent in Central Vietnam, some million of tonnes of cement are transported every year from the North to the South and Central Vietnam.

Although the State has concentrated resources for the development of the cement industry, the production capacity still falls short of demand. Vietnam has to import clinker from other countries in the region. The import accounts for 15-18 per cent of the total output: 3.1 million tonnes in 2002, 4.49 million tonnes in 2003 and 4-4.2 million tonnes in 2004. According to the plan, until 2007, Vietnam will have to import clinker with ever increasing prices (currently at US$23.8/tonne FOB Thailand and expected to be higher in the future).

Who cares?

The government has assigned Vietnam Cement Corporation the task of stabilising the cement market. As the corporation makes up only 45 per cent of the design capacity of the cement industry and some 50 per cent of market share, it has to calculate the consumption of different regions by months and quarters, balancing the plan of transport and reserving some one million tonnes of cement and clinker to meet the sudden rise in demand. The corporation has designated each enterprise a certain region to supply and stabilise the market. The enterprises must apply advanced technology, improve the quality, reduce the production cost and ensure sufficient reserve to meet sudden rise in demand. The enterprises are also required to maintain the outlet price and control the market prices against hoarding. The corporation itself has to reduce its profit to implement the task.

According to the suggestion by the Miyazawa programme, the regulating role should be transferred from the Corporation to the Ministry of Construction. However the ministry thinks that it would make the enterprises run after profit and ignore the supply to distant regions. Some experts believe that in such a case the ministry must have a market stability fund contributed by the enterprises per cement tonnage. The ministry will use the fund to compensate for the transport to distant regions.

In the meantime the ministry of construction will co-ordinate with ministries of trade and finance and cement corporation to assess the demand in different regions and regulate the supply. Related joint ventures and cement enterprises outside the corporation must also share the responsibility in the common efforts.

In the future when cement projects are built in South Vietnam such as Binh Phuoc, Tay Ninh, Ha Tien 2-2, Thach My, Dong Lam, Thua Thien Hue, the task of stabilising the cement market will be shifted from the corporation to other organisation together with the establishment of a market stability fund.

• Quynh Chi