According to VIRAC’s report, Vietnam cement market in the first 6 months of 2023 is not very positive. The market supply-demand gap remains high. Excess cement production compared to demand makes this industry difficult.
Summary of Vietnam cement market report
According to VIRAC’s report, in the first 6 months of the year, the demand supply ratio was only x%. This shows that Vietnam’s cement industry is still struggling to find output.
Indeed, cement consumption in both the domestic and foreign markets fell sharply. Although domestic consumption improved in the second quarter of 2023, overall was still lower than the same period last year. Besides, cement exports of all kinds also increased sharply in the second quarter of 2023 in some markets. However, the positive growth from the Bangladesh and Taiwan markets has not offset the decline from the Chinese market.
The cement market tends to shift from clinker exports to increased cement exports. There are 2 reasons for this. The first reason is due to the increase in clinker export tax from January 1, 2023. The second reason is because China’s demand for cement and clinker dropped sharply.
Overview of Vietnam cement market
Consumption and export of Vietnam cement market
Activities of cement consumption in Vietnam:
Domestic cement consumption decreased by x% over the same period in 2022.
Source: VIRAC
According to the VIRAC report, cement consumption reached 43 million tons, down 10% over the same period in 2022, of which, domestic consumption reached nearly 29 million tons, down x% over the same period in 2022. Domestic cement consumption dropped sharply because domestic demand for cement in the first 6 months was still low. The low demand for cement is relatively understandable due to the impact of the construction industry’s decline. Tight credit policy makes it difficult for investors to implement construction projects.
Although the second quarter of cement consumption has improved, increasing x% compared to the previous quarter and approximately over the same period. However, this improvement is only temporary as consumption shows a gradual decrease month by month.
Cement is a specific product that is sold and distributed by region. Cement consumption is strongest in the South, with many infrastructure projects being implemented, accounting for x% of the total consumption of the country. Meanwhile, the Central region has the weakest consumption, accounting for only x% of total domestic consumption.
Source: VIRAC
Vietnam’s cement export activities:
Cement exports in the first 6 months of the year decreased in both output and turnover. According to VIRAC’s report, cement export output reached x million tons (down x% over the same period in 2022) and cement export turnover reached nearly $700 million (down x% over the same period).
Source: VIRAC
The average export price in the first 6 months of the year reached x USD/ton, x% higher than the average in 2022. However, this is a price that has gone down compared to the beginning of the year. Bright spot in cement export Q2/2023 is up x% y/y in 2022 although it’s still flat compared to the previous quarter.
Exports in the first 6 months of the year increased sharply in Bangladesh and Taiwan, partially offsetting the decline from the Chinese market.
Production of Vietnam cement market
According to VIRAC’s report, total cement production of all kinds in the first 6 months reached x million tons, down x% over the same period 2022. In which cement decreased by x% over the same period; clinker increased by more than x% over the same period in 2022.
Source: VIRAC
The reason for the decline is because in the first half of June, many cement factories in some northern provinces have limited the mobilization of machinery and equipment that consume large amounts of electricity during peak hours. However, the early conditions were soon remedied. Cement production in the last 4 months has continuously increased rapidly, although total production output recorded a decrease y/y, but Q2/2023 output improved by 19% compared to Q1 (although still down 0.1%)
The second quarter of 2023 recorded the highest quarterly output since 2021, showing that the cement industry is gradually recovering after 2 years of difficult operation. The first 6 months of 2023, show that manufacturers change product structure, increase clinker output. Accordingly, in the first 6 months of 2022, clinker accounted for nearly x% in the production structure; but in the first 6 months of 2023 this number has increased to y%.
Source: VIRAC
Forecast of Vietnam cement market: there will be many difficulties from now until the end of the year
Difficulty 1: Project supply and construction demand are low
It can be seen that the market for civil construction is affected by the gloom of the real estate market. Currently, the trend of credit tightening and high interest rates make it difficult for homebuyers. House prices are now high compared to the needs and affordability of the majority of people. These reasons cause the demand for construction to decrease.
Compared to the commercial housing segment, non-residential construction is relatively more sustainable thanks to the post-pandemic economic recovery. However, office and commercial projects will only partially offset the decrease in construction volume. The construction needs of the office types also depend on the low scale compared to the commercial housing segment or the long time for legal completion and project development.
Difficulty 2: Cement exports are expected to decrease
According to the VIRAC forecast, cement exports in the last 6 months are expected to decrease. The reason for this is the fact that the cement export tax will increase from 5% to 10% from January 1, 2023. Tax increases cause many domestic cement enterprises to suffer because the selling price is not enough to cover production costs and taxes. In the context that export clinker prices do not increase, enterprises also have to bear additional tax costs, which will reduce competitiveness.
Vietnam’s cement exports mainly depend on a few main export markets (China, Philippines, etc.) so they are heavily influenced by these markets. Meanwhile, in the two markets of China and the Philippines, there are signs of a decline in demand for cement.
In the short term, demand growth for cement in China is forecast to remain unchanged, around 0-3%. Cement exports to China in 2023 are expected to improve compared to the same period in 2022. However, the reopening of China also means that Vietnam’s cement and clinker exporters may have to compete harder to win contracts with China. Therefore, cement exports to China are forecast to decrease.
In the long term, cement demand in China will decrease due to the slowing urbanization process in the country and weak construction activity. Vietnam’s exporters will face a long-term decline in the growth of total export output.
The Philippines announced the imposition of a temporary anti-dumping tax on Vietnamese cement products: dozens of businesses were subject to anti-dumping tax, some of which were taxed quite high, up to more than 23%. This is also one of the forecast signals that cement exports will decrease in this country.
Prospects of Vietnam cement market: Signals from the domestic market
(Vietnam cement market has shown some promising signals to help increase domestic cement consumption, but these signals are still quite vague.)
Prospect 1: Public investment is the main growth driver of the cement market, but disbursement is slow
In the context that consumption and export drivers are affected by inflation pressure, rising exchange rates and fluctuating global economy, public investment is the driving factor for growth in the cement market. According to the General Statistics Office, if public investment disbursement increases by 1% over the previous year, GDP will increase by 0.058%. The increased focus on public investment is also expected to create spillover effects on many industry groups, including the building materials industry in general and the cement industry in particular.
Source: VIRAC
However, the denuclearization and implementation in Vietnam still have many obstacles due to many intermediary procedures. Many projects from previous years are also in a state of stagnation, not yet disbursed.
To remove difficulties for the cement industry in particular and the building materials industry in general, the government needs to take measures to quickly disburse funds and cut down on procedures so that businesses can have more motivation to produce.
Prospect 2: The domestic construction industry in general has many favorable factors for construction
The growth rate of Vietnam’s construction industry is forecasted to have a growth rate proportional to the economic growth rate. According to VIRAC report, growth forecast GDP 2023 reached 6.5%, while this figure for the construction industry reached 6.5%-7%.
Meanwhile, the weather cycle is forecasted to change to El Nino state (with low rainfall characteristics) from 2023, creating favorable conditions for construction activities, especially in transport infrastructure projects.
Prices of construction materials such as steel are expected to drop due to low world steel demand due to inflationary pressure. The trend of monetary tightening, and the Chinese real estate market will need a few more years to recover from the crisis; as well as the problem of supply chain disruptions resumed after the pandemic are some signals causing difficulties for the cement market. However, some materials such as backfill, leveling sand and stone still maintain an uptrend.
Cement prices continue to stay high because the prices of input materials in cement production (gasoline, oil, and coal prices) still increase and between high levels, the supply of raw materials is scarce. In which the coal price accounts for over 60% of the production cost of cement, the high coal price greatly affects the production cost of cement.
Most of the coal supply in the cement industry comes from imports, but the current price of imported coal, although reduced, is still higher than the period 2015-2019. These things both create advantages and also cause difficulties for the cement market. High raw material prices and high dependence on foreign countries make cement manufacturers passive in operating production.
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The information collected in “Cement industry report Q2/2023“. The report provides full information on macroeconomics, trade supply and demand of the cement market. Besides, the report also has forecasts and prospects of the cement industry with the latest updated information.
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