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Tuesday, June 18, 2024

Cement industry vulnerable to foreign takeovers: VNCA

The Saigon Times

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HCMC – Vietnam’s cement sector is grappling with a crisis as multiple businesses teeter on the brink of bankruptcy or foreign acquisition due to plummeting production and consumption levels, according to the Vietnam National Cement Association (VNCA).

It has appealed to the prime minister for intervention, citing continuous declines in cement consumption since 2022.

Despite the country having 61 cement plants with a collective capacity of about 117 million tons annually, consumption in 2023 only reached around 87.8 million tons, with 56.6 million tons consumed domestically.

“Domestic cement consumption plummeted by 16% in 2023 compared to the previous year. This slowdown is squeezing the cement industry, raising the risk of bankruptcies and fire sales to foreign firms,” VNCA said.

This decline has resulted in a surge in cement inventories, forcing many plants to reduce capacity or halt production.

The industry’s struggles are rooted in weak domestic demand, with infrastructure projects relying on traditional technologies that require less cement. A dormant real estate market further limits cement consumption.

Furthermore, rising fuel and energy prices, particularly coal, have driven up production costs, exacerbated by a recent increase in export duty on clinker from 5% to 10%.

To alleviate the crisis, VNCA has proposed measures such as boosting domestic consumption through innovative infrastructure investments and advocating for the abolition of export duty on clinker.

The association also called for help from banks regarding debt restructuring and interest rate reductions for cement businesses, while discouraging foreign investors from carrying out new projects in the sector.

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