The Ministry of Construction has called for the immediate revision of construction ceramic and porcelain production targets in the wake of excess supply of these products on the market.
Nguyen Quang Cung, director of the ministry's building materials department said a concrete survey should be conducted to provide investors and industry managers with honest facts and figures to avoid further oversupply.
According to the Vietnam Construction Porcelain and Ceramic Association (VCPCA), half of the 50 businesses producing ceramic and porcelain for construction are teetering on losses because of bank loans and large stockpiles.
"Some producers have even resorted to selling their products at prices lower than cost," said the associations chairman Dinh Quang Huy.
The investment and development of ceramic and granite tiles and sanitary-ware products in the past six years had grown rapidly, at an average rate of 25-30 per cent a year, Mr Huy added.
This year businesses expect to produce at least 169.5 million sq.m of ceramic and granite tiles, 18 million sq.m more than in 2004 and 2.5 times higher than in 2000.
Ceramic sanitary-ware capacity is also anticipated to reach 6.95 million products this year-450,000 higher than in 2004 and three times the figure for 2000, Mr Huy said.
However, the market demand in 2005 is only expected to reach 120mil sq.m for ceramic and granite tiles, and 4mil sanitary-ware products.
Mr Huy said the "frozen" real estate market had also contributed to the problem.
In addition, Cung, from the construction ministry, said that producers' focus on the domestic market and lack of expansion into exports had contributed to oversupply, with only 10 per cent of products exported compared to the targeted 20 per cent.
The situation prompted the association to ask the Government last month to put a stop to any investment into ceramic and granite tiles, and sanitary-ware projects as a temporary measure to cope with the crisis.
Local economists reported that as average sanitary ware production lines need investment of VND50-60 billion (US$3.15-3.78 million), businesses were wasting thousands of millions of VND.
When the investment boom started in 2000, the construction ceramic and porcelain association alerted businesses of a possible oversupply and sent a warning to relevant ministries and offices.
In early 2001, the construction ministry officially asked the Government for the first time to temporarily halt projects investing in ceramic tiles and sanitary ware.
VNS
Vietnamese
