HCM CITY — For the third consecutive year, the construction-material sector has an abundance of stock, with around 2 million tonnes of cement and 500,000 tonnes of iron that cannot be sold.
"For iron, the acceptable amount to be in stock should be around 250,000 tonnes. Also, the industry must pay interest on loans of VND150 billion (US$7 million) each month right now," said Nguyen Tien Nghi, vice chairman of the Viet Nam Iron Association.
For cement, if the real estate market remains stagnant and fewer infrastructure projects go on line as is expected, many cement plants will have to stop producing, and some of them might face bankruptcy.
"The only thing that would improve the situation would be significant policies on interest rates that could boost production and consumption," added Nghi.
Because of the increasingly limited local market demand, the two industries must seek customers outside Viet Nam.
In 2011, the iron industry exported 1.87 million tonnes, an increase of 44.5 per cent compared with 2010.
To maintain those results, iron companies have been told to promote co-operation with the Viet Nam Chamber of Commerce and Industry to increase trade promotions and prepare for more anti-dumping lawsuits from the US, the number of which has increased recently.
The Viet Nam Cement Association plans to export 6 million tonnes in 2012 and sell 52 million tonnes for the local market.
The African market is one with potential for the Vietnamese cement industry, but most of the companies are not eager to sell there because cement is bulky and has low value. Transport expenditures are the main barrier.
Southeast Asia and South Asia are also promising, but competition from cement plants from Thailand, mainland China, Indonesia and Taiwan makes selling more difficult to achieve.
Local enterprises find it difficult to compete at these markets because of high amortisation rates since most production chains have been bought recently. There are also high interest rates.
The iron and cement industries have faced challenges since 2009 as the Government decided to reduce State investment in order to control inflation. In addition, interest rates doubled from 12 per cent to 24 per cent a year. — VNS