VietNamNet Bridge – How to stabilize the cement market?, which has been in a fever in the last month, turns out to be a difficult question. Cement producers sat in a meeting with the Ministry of Construction’s (MOC) leaders yesterday to discuss the answer.

Wrongly forecasting market demand

MOC earlier this year predicted that the cement demand will rise by 10-14% this year compared to 2007. However, just in the last four months of 2008, the demand in HCM City and eastern areas of the South (region 4) had increased by 20-21% over the same period of the last year, far outstripping the predicted figure.

According to the Vietnam Cement Association, the south consumes 40% of the total cement output, but it can produce 27% only, which has resulted in the cement shortage.

Nguyen Quang Cung, Director of the Construction Material Department under MOC, admitted: “the actual demand in region 4 is higher than our estimates”, adding that this is the reason that has caused the recent cement shortage.

Concerning cement speculation, which has been considered as one of the reasons behind the cement shortage, Cung said that no signs of speculation has been found, stressing that the overly high demand, outstripping the supply, is the main reason.

The survey conducted by Ha Tien 1 Cement Company showed that the consumption in region 4 rose dramatically in March 2008 by 38.20%, and in April by 12.29%. Though the cement consumption decreased in May (- 5.35%), the region still consumed 3.2mil tonnes of cement in the first five months of the year, up by 15% over the same period of the last year.

In order to settle the problem, 50,000 tonnes of cement have been transferred from the north to the south. However, new problems have arisen, such as southern consumers not liking northern brand names. According to the Vietnam Cement Industry Corporation, 6,000 tonnes of Hoang Thach brand name cement have been left unsold two weeks after they were carried to the south.

Supply will exceed demand

In 2008, Vietnam will have 11 new cement plants with the total output of 12mil tonnes a year. Five plants have become operational since the beginning of the year, including two to provide products to the south.

“The supply will exceed the demand by 2009,” said MOC Minister Nguyen Hong Quan.

Meanwhile, cement producers complain that they are suffering from the higher material prices. Thailand-sourced clinker import prices were .5/tonne in May and .5 in June. Ha Tien 1 said that he could not buy anything from northern plants in April and May, and will buy 50,000 tonnes in June after the intervention of the Vietnam Cement Corporation.

Most of the producers attending the meeting yesterday asked for the permission to adjust the sale prices. Currently, producers still have to keep the prices unchanged as per request of the Government, and suffer losses. However, people still have to buy products at very high prices from retailers.

Regarding the proposal on price increase, Nguyen Tran Nam, Deputy Minister of MOC said on the sideline of the meeting that if producers raise prices at this moment, the situation will be more insecure. If not, producers will continue suffering losses. It really is difficult to answer question.