Cement overcapacity from 2017 predicted
1/10/17 9:23 AM
The nation is expected to see cement overcapacity from 2017 as production has increased strongly in recent times while Vietnamese cement has turned less competitive on the world market.
According to the Vietnam Cement Association, the industry’s total designed capacity amounted to nearly 88 million tons a year in 2016. With projects underway and finished in 2018 taken into account, the figure would shoot up to 108 million tons.
Furthermore, local enterprises have invested in technology upgrades, with the production capacity of the industry estimated to surge to 120-130 million tons in 2020.
Nguyen Quang Cung, chairman of the association, said domestic cement consumption is estimated at around 82 million tons a year before 2020, which means an annual oversupply of 36 to 47 million tons.
The nation consumed around 60 million tons of cement in 2016. If consumption rises by five to six million tons a year, the market demand is predicted to grow to 80-82 million tons in 2020. Therefore, the local market is expected to see a cement glut from this year, Cung said.
Starting cement exports in 2010, Vietnam became one of the biggest cement and clinker exporters in the world in 2014 with an export volume of 20 million tons. However, cement exports dropped 18% versus the previous year to 16.2 million tons in 2015 and slid a further 2% last year.
Export value also declined due to tough competition from China, India and other countries. Since 2014, China has actively launched low-priced cement onto regional and global markets given its overcapacity.
Meanwhile, Vietnamese exporters are concerned about more challenges when new policies become effective.
The Government issued Decree 100/2016/ND-CP on July 1, 2016 stipulating that exported goods processed from natural resources or minerals with a total value plus the cost of energy accounting for 51% of the final price or more will not get value added tax (VAT) refunds.
Meanwhile, as per Decree 122/2016/ ND-CP on September 1, 2016, if the value of natural resources and minerals plus energy costs account for 51 % of the goods, they will be subject to an export tax rate of 5%.
When the regulations take effect, Vietnamese cement products will turn less competitive because export costs will increase. Some enterprises will have to stop production or go bankrupt, Cung said.
Therefore, the association suggested the Government and ministries put the implementation of the two decrees on hold. At a recent annual conference in Indonesia, the Cement Association of Southeast Asian Nations expressed concern over the Vietnam’s tax policies, saying that they may drag down the development of the cement industry.
In related news, Prime Minister Nguyen Xuan Phuc on January 2 attended a ground-breaking ceremony of Minh Tam cement factory in the southern Binh Phuoc Province.
Covering 400 hectares, the project has total capital of VND12 trillion and production capacity of 4.5 million tons a year. Xuan Thanh Group, the investor of the cement factory, expects to finish construction within 24 months, Nguoi Lao Dong newspaper reports.