There is talk of recovery in the Vietnamese cement industry, after a long period of oversupply that has seen 20% manufacturers on the verge of bankruptcy, according to the Secretary General of the Vietnam Cement Association. Dr Do Duc Oanh added that over 10 M&A deals were concluded in 2012, and some plants were sold to foreign companies a manufacturers struggle to cope in a massively oversupplied market.
The rapid expansion of the cement industry in Vietnam drastically outpaced growth in cement demand, which currently stands at around 54 million t compared to available production capacity of 68 million t. The Ministry of Construction anticipates demand of 60 – 61 million t by 2015 and exports of 10 million t, but for the time being the industry seems pretty stagnant.
The latest report from the Ministry of Planning and Investment, however, shows a general recovery in the Vietnamese economy, with 8792 businesses that had suspended production resuming operations in the last five months, including 1309 from the manufacturing industries and 1475 construction firms. Some cement and steel producers also reported improved sales in March and April, but the general feeling is that recovery for the cement industry will be slow while such significant overcapacity exists.
The government is issuing a VND30 trillion bailout package to resuscitate the real estate market, which is hoped will provide a boost for cement and steel, but again analysts are warning that building material manufacturers should lower their expectations. As both the US and much of Europe has found, the road to recovery is long and progress can be very slow indeed.
Written by Katherine Guenioui.