Domestic sales boost cement sector’s growth

08:38 | 02/02/2017 Industry

(VEN) - In 2016, despite a slight decrease in exports, the cement sector continued to grow thanks to increased domestic sales. The Vietnam National Cement Association is forecasting that 2017 cement output will reach about 80 million tonnes, of which 65 million tonnes would be sold domestically and 15 million tonnes exported.  

domestic sales boost cement sectors growth

Export instability

According to the Construction Materials Department of the Ministry of Construction, an estimated 5.91 million tonnes of cement were sold in the domestic market in November 2016, while 1.10 million tonnes of clinker and cement were exported. In the first 11 months, domestic sales totaled 54.52 million tonnes, equivalent to 106.8 percent of sales in the same period of 2015; clinker and cement exports reached 13.97 million tonnes, equivalent to 94.07 percent of the same period of 2015.

Construction Materials Department Director Le Van Toi affirmed that the cement sector achieved its annual sales target in 2016.

Let’s have a look at cement sales in the past six years. In 2011, domestic sales and exports respectively reached 43.26 million tonnes and six million tonnes; in 2012: 47.51 million tonnes and 8.1 million tonnes; 2013: 46.4 million tonnes and 15.1 million tonnes; 2014: 50 million tonnes and 21.1 million tonnes; 2015: 55.6 million tonnes and 16.5 million tonnes; and 2016: 59 million tonnes and 16 million tonnes (estimated). These statistics show continuous growth of domestic sales and unstable export activities.

The decline in cement exports was attributed to objective factors, including changes in the production and sales policies of major cement producers such as Thailand, Japan, and China. China, for example, has faced a redundant capacity of about 670 million tonnes after a period of heightened development. In addition, the low export prices of Chinese cement have presented a major challenge for Vietnamese cement businesses.

Moreover, Vietnamese cement businesses, including even the Vietnam Cement Industry Corporation (VICEM), still lack long-term sales contracts. Although input material prices have been stable in recent times, future trends are hard to predict. According to the Vietnam National Cement Association, Vietnamese cement exporters remain small in size and still sell via intermediaries.

Export strategy required

In the opinion of Vietnam National Cement Association President Nguyen Quang Cung, Vietnamese cement businesses need to build their combined strength through tight cooperation in order to enhance price competitiveness of export products. Currently, only major producers such as VICEM and the Vissai Group highlight their advantages in negotiations with import partners.

Sharing this opinion, former Vice Minister of Construction Nguyen Tran Nam said that cooperation would help domestic cement businesses expand production, attract big export orders, and avoid price squeezes. Sustainable export growth will help the cement sector reduce inventories, he added.

domestic sales boost cement sectors growth

Tran Thanh Hai, Deputy Director of the Agency of Foreign Trade under the Ministry of Industry and Trade, said that to boost exports, businesses need to apply fuel-efficient and environmentally friendly technologies. Along with improving product quality, they should streamline the transportation process to save time and money so that their products can be sold at competitive prices. “To enhance their competitiveness, cement businesses have no other option but to professionalize their operations at all stages, from production to distribution, sales and customer care,” he emphasized.

Vietnam has signed eight free trade agreements (FTAs) in order to facilitate the access of Vietnamese goods to foreign markets through tariff reductions and eliminations. Therefore, in the opinion of Tran Thanh Hai, cement businesses should prioritize exports to countries with which Vietnam has FTAs. To benefit from these agreements, they need to seek preferential certificates of origin from 18 Regional Import, Export Management Offices of the Ministry of Industry and Trade.

To make cement a key and sustainable export product, state management authorities, including the Ministry of Industry and Trade and the Ministry of Construction, and the Vietnam National Cement Industry Association, need to work together to create a long-term export strategy. They should encourage cement producers and exporters to maintain tight cooperation in an effort to improve product quality and intensify exports.

The Ministry of Industry and Trade has assigned its Agency of Foreign Trade to coordinate with the Construction Materials Department of the Ministry of Construction to produce an analysis of supply and demand in the global market, as well as the export capacity of domestic businesses, in order to work out suitable production and export plans for 2017.

Lan Anh