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Hard Times for Vietnam’s Cement Companies


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Owing to difficult consumption, many cement companies are now producing with only about 70-80 percent of their capacity. However, the total capacity of the entire cement industry is constantly increasing. In 2011, the designed capacity of the whole cement sector was up to 65.5 million tons. In 2012, the country is estimated to receive additional 7-8 cement projects to be in operational, with an estimated capacity of approximately seven million tons per year, lifting the total supply to the market to 70 million tons per year, 20 million tons higher than the actual demand.

Capacity in excess, highly rising inventory and declining consumption have led to fierce competition in the cement market.

Both large and small cement manufacturing companies are en masse offering promotions in many ways to drain the inventory although they see they will have to suffer big losses. However, this is the only way to sell more goods.

Low output while high input costs have caused many difficulties for enterprises. In the past time, gasoline costs rose by 32-43 percent, electricity price up 15.28 percent, and forex rate up 9 percent, packages up by 25 percent and coal and main energy source used in the cement industry up nearly 90 percent. Nevertheless, no businesses dare to think of increasing the cement price because if doing so, they will be likely to immediately

lose the market and die.

Oanh said presently, nearly 100 cement firms are very difficult such as Cam Pha Cement JSC with accumulated loss at up to 1.259 trillion dong, and then Ha Long Cement JSC with loss at 982 billion dong and Dong Banh Cement JSC with loss of 149 billion dong. Some other cement firms were dissolved such as Thanh Liem cement firm (Ha Nam province) and Ang Son cement firm (Quang Binh province).

Notably, with reducing consumption and production in moderation, cement companies are experiencing great difficulties in the debt repayment and equipment depreciation, especially newly invested businesses with large depreciation such as some plants of Vietnam Cement Industry Corp (Vicem), Thai Nguyen cement firm and Dong Banh cement firm. ball mills:http://www.hxjqchina.com/product-list_34.html
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Till date, as many as 16 cement projects have been guaranteed by the government in borrowing capital, of which 15 projects have been guaranteed via Ministry of Finance (MoF) and one project has been guaranteed through the State Bank of Vietnam (SBV).

The total foreign debt value guaranteed by the government was $1.675 billion, equalling to 17.92 percent of the total overseas loan value guaranteed by the government.

Meanwhile, the total outstanding debts of cement projects are now still at $988.6 million.

Also of these 16 cement projects, four of them are facing difficulties in debt repayment and MoF had to pay the debt as these loans fell due, including Hoang Mai cement plant, Tam Diep cement plant, Thai Nguyen cement plant and Dong Banh cement plant.

More tragic is unfinished cement plants of cement firms. All these companies are using loans, even up to 80 percent of the total investment at the interest rate of 19-21.5 percent per year. These are dying projects. With unfinished projects, enterprises are also hard in investment as no banks would dare to disburse in the current difficult economic context. But these cement projects also cannot stop as if these projects are not put into operations, companies will not have capital for debt repayment.

Only when the real estate market is revived, cement ball mill production can flourish. Presently, let the market solve the problem because only reputable companies will survive, weak and less effective firms should be eliminated. Businesses themselves must weigh their ability to set suitable business orientation.

 

 

 

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  • Posted On May 18, 2012
  • Published articles 10

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