Cement companies are facing numerous difficulties including huge losses, high inventories and mounting debts, leading many to halt operations or close.
Ten million tonne redundancy
An official of the Ministry of Contruction admitted that, in the first half of 2012, cement companies encountered unprecedented difficulties. Some companies, such as Hoang Thach and the cement production subsidiaries of Song Da Group, had to reduce their output or halt production.
The chairman of Vietnam Construction Materials Association, Tran Van Huynh said, “Continually rising prices of input materials, high interest on bank loans and lack of liquidity could spell the end for some construction materials supply enterprises."
Some enterprises are on the verge of bankruptcy, including Cam Pha Cement Company, which has incurred a total debt of VND1,200 billion (USD57,224,606), Ha Long Cement Company has lost VND1,090 billion (USD51,979,017), while Dong Banh Cement Company is VND149 billion (USD7,105,388) in the red.
An official of the ministry said, “Demand for construction materials is being frozen due to reduction in Government investment and the slowdown in the real estate sector."
Huynh said, “Now there is a great amount of clinker in stock, about 3 million tonnes, equal to VND3,000 billion (USD143,061,516).”
Despite a decrease manufacturing and consumption, overall productivity has risen 10% compared to 2011, leading to expectations of an inventory redundancy of 10-million-tonne cement this year.
The secretary general of Vietnam Cement Association, Do Duc Oanh, attributed the situation to an inaccurate forecast of the optimistic prospects for the cement industry, leading many companies to invest heavily. Some communes have as many as three cement companies.
Vietnam Construction Materials Association proposed that the Government hasten construction of infrastructure projects using cement.
The association also submitted that the NA apply VAT rate of 5% in 2012 instead of the current rate of 10%.
The Government is about to direct the ministry to restructure the cement production sector and adjust its cement industry development plan.
Huynh proposed that the export of construction materials be managed more effectively in order to put an end to unfair competition and over-development that would squander national resources.