Vietnam: Cement industry faces oversupply

The Ministry of Construction has predicted that domestic cement supply will surpass demand by 2009. The ministry reported that cement manufacturers will have surpluses of 5 million tonnes in 2009 and 10 million tonnes by 2011.

The oversupply has been attributed to a rapid expansion in the cement industry manufacturing base with major investments in 40 recent cement projects, including Hai Phong and Song Gianh that churn out a total capacity of 42.6 million tonnes per year.

The ministry said that despite facing a few difficulties such as obtaining investment and oversupply, the local cement production capacity being higher is a good sign and will aid in reducing annual imported clinker tonnage.

However, with 30 new large-scale projects slated to begin over the next three years, and with local demand being outstripped by production the cement industry will aggressively look to export into new markets abroad.

While demand for cement within the country has been on the rise to keep pace with a booming construction sector, there is a real fear that the increased number of producers will cause a glut in the market that may stall the progress the industry has made over the last five years.

Economists said after many years of facing cement shortages, the industry has made ambitious strides to develop and will now have to look at inventive strategies to find buyers for excess product.

The local market is expected to become extremely competitive over the next few years as producers look to gain a foothold in a buyers’ market.

Experts believe that further problems will arise when the country enters into the World Trade Organisation, and the industry will have to counter flooding of the market by cheap imported cements.

The ministry has asked the government to reign in the industry by limiting the number of investment licences for cement projects and asking provinces to cease investments in cement production.