VIETNAM: Major change anticipated for VN cement industry

The merger of Lafarge Vietnam and Holcim Vietnam, the two big cement manufacturers, is expected to be wrapped up by December 2015. 

Lafarge has advantages in technology research and Holcim has achievements in developing brands. The merger will present a strong rival to other manufacturers. 

Nguyen Cong Minh Bao, a senior executive of Holcim Vietnam, at a meeting with the local press, stated that the two manufacturers would strive to become the leading enterprise in the building material industry.

In July 2015, Swiss Holcim and French Lafarge announced the merger to become LafargeHolcim, present in 90 countries with 2,500 cement plants. 

It is still unclear if the ‘marriage’ of the two manufacturers would give birth to a new cement brand in Vietnam. However, an analyst commented that the two ‘tigers’ j will be even stronger, like ‘tigers with wings’.

He said the merger will force other cement manufacturers to strengthen their competitiveness and undergo restructuring to become stronger as competition will increase because cement productivity is on the rise.

According to Nguyen Van Thien, former chair of the Vietnam Cement Association, Lafarge’s cement plant in Vietnam has the capacity of 500,000 tons a year, but it make the right move when merging with Holcim because it will be able to cut production costs.

Thien noted that existing cement plants, which are numerous and small, should also merge in order to become bigger and more powerful. In Thailand, Malaysia and Indonesia, for example, there are only about 10 manufacturers in each country. Vietnam has up to 60 cement plants, big and small, and they have to compete fiercely with each other.

In 2014, as the domestic real estate market froze, the cement oversupply became even more serious. This forced cement manufacturers to boost exports to reduce inventory volumes. 

A report showed that Vietnam put out 71 million tons of cement products last year, but only 50 million tons were sold in the domestic market. Cement manufacturers hope 71-73 million tons would be consumed this year, a modest increase of 4-7 percent compared with 2014.

Nguyen Quang Cung, chair of the Vietnam Cement Association, also thinks that cement manufacturers should undergo a restructuring process, and merger and acquisition should be encouraged.

Cung said some cement manufacturers are merging and creating the Vietnam Cement Corporation (Vicem). These include Ha Long, Song Da and Song Thao Companies.