VIETNAM: Government streamlines cement industry, reduces proposed plants

The Prime Minister has approved the Ministry of Construction’s proposal to cancel five cement projects for the 2011-2020 period, which would have projected total capacity of 910,000 tons per annum.

The Prime Minister has also agreed to delay implementation of nine other cement projects, while accepting a new project, Long Son in Thanh Hoa province. The 2.3 million ton per annum cement plant kicked off in early 2014 and is expected to become operational by 2018.

Prior to that, nine small projects with the capacity of below 2,500 tons clinker per day, were also eliminated in a Prime Minister’s Decision released in April 2013.

According to the Ministry of Construction, the small projects with the capacity of below 2,500 tons clinker per day are outdated in terms of the energy consumption index, while they require a high investment rate and cause environmental pollution.

The project development program was set up several years ago, when cement supply was short and the government called for investments in the field.

Nguyen Quang Cung, chair of the Vietnam Cement Association, noted that all the canceled projects were small and not feasible. The investors were not financially capable enough to implement the projects, while conditions were not favorable for production and consumption.

In addition, the government said it would no longer act as a guarantor for enterprises’ foreign loans, and domestic banks have refused to fund cement projects.

Cung believes that the 2011-2020 cement industry development strategy is out of date and other proposals should be eliminated as well. The strategy was created in 2011, but it was based on statistics collected up to 2005.

Economists have urged the government many times to restructure the cement industry, which is suffering heavily from oversupply.

When creating the strategy, the Ministry of Construction used inaccurate estimates on future cement demand in the future. But demand turned out to be much less than predicted, especially after the real estate market slowed down significantly.

Under the development plan, the cement industry would have been churning out 80-90 million tons by 2015 and 130 million tons by 2020.

Meanwhile, under the building materials development program by 2020 approved by the Prime Minister in August 2014, the cement demand is estimated to be only 56 million tons by 2015 and 93 million tons by 2020, much lower than the designed output.

There are 71 operational reverter-furnace cement-production lines in Vietnam which can produce 73.45 million tons.

Once the other four production lines are put into operation, the total production capacity would be 81 million tons by 2015. The capacity is believed to satisfy domestic demand even if the national economy warms up.