HCMC – The recent increase in electricity prices has eaten into cement producers’ profits as it has driven up input costs amid the low market demand.
Data from securities firm Mirae Asset showed that electricity bills account for around 15% of cement manufacturers’ production costs while the percentage is lower at steel mills using rotary kilns, at 10%.
A 3% increase in electricity tariffs would lead to higher production costs and thus lower gross profit margins by 13%. That, coupled with weak demand for construction from the struggling real estate sector, has put more pressure on cement production companies.
According to the Vietnam National Cement Association, the current consumer demand for cement in the domestic market stands at 64-65.5 million tons, while production capacity surpasses 110 million tons, leading to an oversupply.
Weak demand is also seen in overseas markets, with revenue from cement and clinker exports to China having plummeted over 90% this year.
In addition, the Philippines recently slammed an anti-dumping duty on cement imports from Vietnam.
In their first-quarter financial statements, local cement maker Bim Son Cement JSC reported a net loss of VND48.6 billion, while Vicem Ha Tien Cement JSC posted VND86 billion losses after tax.