Vietnam cement industry recovers thanks to robust export activities

Vietnam cement & clinker sales volume reached 80.3 million tonnes in 2017, posting an increasing growth rate for 3 years in a row. According to StoxPlus database, there are 107 cement facilities with total capacity of 120.9 million tonnes per year (MTPY) belonging to 93 companies in Vietnam, of which VICEM and foreign-owned companies recorded high utilization of over 80%.

>> See full Vietnam Cement Market 2018 Report: http://bit.ly/2IEVS6Z

Demand: Vietnam cement market saw the light of recovery thanks to clinker export

Figure 1: Total Sales Volume of Cement & Clinker in Vietnam

Source: StoxPlus

As stated in StoxPlus Cement Market Report 2018, Vietnam cement & clinker sales volume reached 80.3 million tonnes in 2017, posting an increasing growth rate for 3 years in a row. Although domestic consumption has contributed largely of over 70% for the total sales for several years, recent years have witnessed its sluggish growth rate from 9.5% (2015) to 1.4% (2017). While domestic consumption sustained its growth, export activity drove the market with export volume surging up to 19.7 million tonnes, leading to robust growth of 27.7% y.o.y thanks to increasing demand from key markets including Bangladesh and Philippines. Additionally, China emerged as a potential exporting market since Chinese Government has implemented an unprecedented pollution crackdown in November 2017 as the country shuts down tens of thousands of cement factories in the effort to address China's infamous pollution. In comparison to 2016, cement export volume fell sharply by 21.4% while clinker posted strong growth of 53.8%, making clinker become the key driver for cement export activity in 2017. This could be explained by the fact that foreign countries tend to favor clinker import over cement due to cost reason, and this trend would continue to shape Vietnam cement export picture in the long-term prospects.

Supply: While local private companies continued to launch “mega” projects, foreign giant strengthened its presence via M&A activities

Figure 2: New Cement Facilities Launched in 2017

Source: StoxPlus

According to StoxPlus database, there are 107 cement facilities with total capacity of 120.9 million tonnes per year (MTPY) belonging to 93 companies in Vietnam, of which VICEM and foreign-owned companies recorded high utilization of over 80%. In 2017, private companies continued to operate five new “mega” projects (designed capacity over 2 MTPY) equivalent to 18.5 MTPY, resulting in the surge in total production capacity by 18%. The projects are developed not only by giant local private companies such as Vissai or ThaiGroup, but also by other local players, especially Thanh Thang and Long Son, which indicated a trend line of large-scaled projects favor. In line with StoxPlus’s analysis, cement facilities can hardly operate efficiently if the designed capacity is under 1 MTPY, especially when taking into account the electricity cost, maintenance expenses and other fixed costs. With regard to foreign players, 2017 witnessed active M&A prospect when SCCC & SCG put heavy investments with the entire ordinary share acquisition of LafargeHolcim & VCM respectively.

POSITIVE SIGNAL FROM REGULATORY FRAMEWORK

In December 2017, Vietnamese Government has issued Decree 125/2017/ND-CP, which is expected to boost Vietnam cement export activities. The entitled 0% export tariff for cement has sharpened Vietnam competitiveness, especially in the fierce race with ASEAN countries apart from China. It is estimated that export companies now can enjoy higher profit by US$ 3-4.5/ton under the new tariff. Additionally, enterprises are being encouraged to participate in exporting activities thanks to VAT reimbursement scheme. New regulations have taken effect immediately, which is indicated in 4M/2018 export results. In 4M/2018, total cement sales reached 29.83 million tonnes, recording a growth rate of 13% y.o.y mostly thanks to the active export activities, which increased by 29% y.o.y.

PROJECTION: VIETNAM CEMENT DEMAND & SUPPLY WOULD REACH THE EQUILIBRIUM IN 2027

Figure 3: Forecast of Domestic Production Capacity and Domestic Consumption in Vietnam

Source: StoxPlus

Based on StoxPlus analysis of macroeconomics and historical cement demand from 2000, associated with the impact of related factors such as the status of infrastructure development and residential sector in recently, demand growth for cement is projected at a growth rate of 5% until 2030. Vietnam is expected to face with continuous supply surplus before reaching the equilibrium in 2027 at 130.8 million tonnes of cement if not taking into account of uncertain cement projects in Vietnam. Even though Vietnam cement still moves in tandem with real estate boom and burst, this industry is still expected to enjoy healthy growth in years to come.

You can find more information in our sixth comprehensive report on Vietnam Cement market, featuring the most up-to-date information on cement projects as well as practical investment opportunities, risks, and mitigation measures. Please visit http://bit.ly/2IEVS6Z for report details.

Contact our Cement Specialist team:

Dong Le - Director, Biinform

Email: Dong.le @stoxplus.com

 

Hai Khieu - Assistant Manager, Biinform

Email: Hai.khieu@stoxplus.com

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