Declining cement consumption, along with rising input costs has resulted in Vietnam’s cement industry suffering losses worth VND220bn (US$10.53m) during the first 10 months of the year, reports Vietnam News.
During the same period, Viet Nam Cement Industry Corporation or VICEM’s members have seen their market shares decrease significantly by three per cent.
The corporation said that low demand due to the freezing property market, high lending interest rates, a reduction on public investment projects and increased input costs were blamed for a decline in cement consumption.
Of the input cost, prices of fuel rose by 32 to 43 per cent; electricity, 15.28 per cent and coal 88 per cent, according to VICEM.
Meanwhile, VICEM’s Chairman of Management, Le Van Chung told Vietnam Investment Review that as most cement projects were invested by foreign currencies, debt payment has become a huge burden to the corporation’s members due to the global financial crisis, continuous depreciation of Vietnamese dong against US dollar, high lending interest rates and high inflation.
He cited that seven out of 10 cement plants are expected to be put into operation this year and the corporation’s members were expected to pay back a debt worth VND3.2trn (US$153.11m), he said.
Taking part in the market since the end last year, Dong Banh Cement Plant – a fledging member of VICEM – posted a loss of VND141bn (US$6.75m) after one year of operations.
The Dong Banh Cement Plant was lent up to 80 per cent by Bank for Investment and Development of Viet Nam, Bank for Agriculture and Rural Development and ANZ Bank.
According to the Ministry of Construction, the Dong Banh Cement Plant would be in a shortage of VND600bn (US$28.7m) to pay back loans and interest during 2011-15 period.
The corporation, however, was considering several solutions to restructure the cement industry while sharpening its competitiveness. Of which, several inefficient cement plants might plan to file for bankruptcy.
An official of Viet Nam Cement Association said export activity was a good solution to combat high interest rate loans and slow cement consumption on the domestic market.
According to VICEM, the cement sector produced about 3.63Mt of cement in October, bringing a total volume of 39.4Mt in the first 10 months of the year.