Cement industry of Vietnam Status and Prospective

Cement industry of VietnamStatus and Prospective(Paper for(Paper for CMTsCMTs 9th Asia Cement Markets 9th Asia Cement Markets conference)conference)19-20th April 2007 Hanoi,Vietnam19-20th April 2007 Hanoi,Vietnam Presented by Chairman of VNCANGUYEN VAN THIEN In building and developing economy,industrialization and In building and developing economy,industrialization and modernisationmodernisation of Vietnam,cement industry is considered of Vietnam,cement industry is considered one of the important industries.one of the important industries.During 5 year plan 2001-2005,cement industry has During 5 year plan 2001-2005,cement industry has developed rapidly and strongly.In 2001,cement demand developed rapidly and strongly.In 2001,cement demand has reached 16.7 million tons;in 2005,nearly 29 million has reached 16.7 million tons;in 2005,nearly 29 million tons.Growth rate during 5 years is 10.40%.In 2006,tons.Growth rate during 5 years is 10.40%.In 2006,demand increased to 32.5 million tons.demand increased to 32.5 million tons.Growth rate for 5 year plan 2006-2010 will be about 10.50-Growth rate for 5 year plan 2006-2010 will be about 10.50-11.50%,and the cement demand by 2010 will be about 50 11.50%,and the cement demand by 2010 will be about 50 million tons.million tons.I.INVESTMENT IN DEVELOPING CEMENT I.INVESTMENT IN DEVELOPING CEMENT INDUSTRY DURING 1996-2005.INDUSTRY DURING 1996-2005.To meet the above-mentioned estimations over To meet the above-mentioned estimations over recent 10 years(1996-2005)cement industry in recent 10 years(1996-2005)cement industry in Vietnam has continuously developing and Vietnam has continuously developing and modernisingmodernising considerably in terms of technology,dimensions and considerably in terms of technology,dimensions and structure.structure.Most current cement factories use dry method Most current cement factories use dry method of technology.Except small vertical shaft kiln cement of technology.Except small vertical shaft kiln cement factories with backward technology and equipment,all factories with backward technology and equipment,all rotary kiln cement factories have capacity of 1.4 to 2.3 rotary kiln cement factories have capacity of 1.4 to 2.3 million tons/year with the same level of technology and million tons/year with the same level of technology and equipment to those of other cement industries in the equipment to those of other cement industries in the South East Asia.South East Asia.Regarding ownership structure,except cement joint Regarding ownership structure,except cement joint venture companies with foreign partners,state owned venture companies with foreign partners,state owned cement factories are gradually moving to become joint cement factories are gradually moving to become joint stock companies and some private enterprises have stock companies and some private enterprises have emerged.emerged.Over last decade cement industry has contributed about Over last decade cement industry has contributed about 10-12%GDP of all industries and gradually has met the 10-12%GDP of all industries and gradually has met the cement demand in cement demand in contructioncontruction and national economic and national economic development.development.Facing the demands of international integration and Facing the demands of international integration and development Vietnam cement industry will have to confront development Vietnam cement industry will have to confront many new challenges.Thus,evaluation and analysis of the many new challenges.Thus,evaluation and analysis of the status of Vietnam cement industry are necessary for status of Vietnam cement industry are necessary for development investment plan in the coming period.development investment plan in the coming period.Data shows that cement production has increased Data shows that cement production has increased 4 times during 10 year period beginning with 7.40 4 times during 10 year period beginning with 7.40 million tons in 1995 to 29 million tons in 2005.million tons in 1995 to 29 million tons in 2005.In general,investments in and development of In general,investments in and development of cement industry over recent decade have been cement industry over recent decade have been correct in terms of directions and methodologies;correct in terms of directions and methodologies;appropriate in scale and rate and corresponding appropriate in scale and rate and corresponding with national economic development growth.with national economic development growth.OUTLOOK FOR VIETNAM CEMENT OUTLOOK FOR VIETNAM CEMENT INDUSTRY IN THE PERIOD OF 2006-2010.INDUSTRY IN THE PERIOD OF 2006-2010.Based upon the socio-economic targets Based upon the socio-economic targets approved by Vietnam National Assembly for the approved by Vietnam National Assembly for the period of 2006-2010 which are as follows:period of 2006-2010 which are as follows:Average GDP growth rate:7.5%/year.Average GDP growth rate:7.5%/year.Average GDP per capita in 2010:US$1080.Average GDP per capita in 2010:US$1080.National population in 2010:88 million.National population in 2010:88 million.Synthesis of calculations indicates that yearly average increase of Synthesis of calculations indicates that yearly average increase of cement demand during 2006-2010 is 11%and demand forecast in cement demand during 2006-2010 is 11%and demand forecast in 2010 will be about 50 million tons.2010 will be about 50 million tons.At the end of the year 2006 total designing capacity in the country was At the end of the year 2006 total designing capacity in the country was 26.70 million tons of cement(excluding the cement grinding stations).26.70 million tons of cement(excluding the cement grinding stations).At present about 30 cement projects are being built with total capacity At present about 30 cement projects are being built with total capacity of 35 million tons of cement.Accordingly by 2010 Vietnam cement of 35 million tons of cement.Accordingly by 2010 Vietnam cement industry will have total designing capacity of about 60 million tons to industry will have total designing capacity of about 60 million tons to meet well the expected demand of 50 million tons.meet well the expected demand of 50 million tons.Investment prospective is constructive and Investment prospective is constructive and favourablefavourable in general.in general.However,facing the economic changes in the region and in the world However,facing the economic changes in the region and in the world and adapting to our economic integration,special attention should be and adapting to our economic integration,special attention should be given to Vietnam cement development investment during the period of given to Vietnam cement development investment during the period of 2006-2010 2006-2010 1.It is necessary to develop the transport and 1.It is necessary to develop the transport and communication in sync with cement projects,communication in sync with cement projects,especially the sea and land transport.Following especially the sea and land transport.Following preliminary calculations at present,annual preliminary calculations at present,annual transportation of clinker and cement by sea from transportation of clinker and cement by sea from the North to the Central and the South is about 3 the North to the Central and the South is about 3 million tons,but by 2010 the transportation million tons,but by 2010 the transportation volume of them by sea and river from the North volume of them by sea and river from the North to the South will be increased to 5-6 million tons.to the South will be increased to 5-6 million tons.2.There should be radical and active measures to protect environment and ecology at factories and vicinity areas,especially the factories having been operational before 2000 need measures to up-grade smoke and dust filtering system to meet criteria of Environment Law.2.By 2010 there will be totally 40 rotary kiln 2.By 2010 there will be totally 40 rotary kiln cement factories(capacity of each from 1 to 2 cement factories(capacity of each from 1 to 2 million tons/year)put into operation(excluding million tons/year)put into operation(excluding vertical shaft kiln cement factories and small scale vertical shaft kiln cement factories and small scale cement grinding stations).Especially in some cement grinding stations).Especially in some provinces such as provinces such as HanamHanam,NinhNinh BinhBinh,ThanhThanh HoaHoa,HaiHai Duong,Duong,QuangQuang NinhNinh there will be cluster of there will be cluster of cement factories.For those localities transport,cement factories.For those localities transport,communication,environment communication,environment polutionpolution are issues are issues to be treated immediately from now on.to be treated immediately from now on.4.Another most important problem to Vietnam 4.Another most important problem to Vietnam cement industry for the time being is to enhance cement industry for the time being is to enhance the competitiveness.This issue should be taken the competitiveness.This issue should be taken into consideration right from the outset of into consideration right from the outset of preparation for investment decisions covering preparation for investment decisions covering technology,technology,equimentequiment,investment rates,profits,investment rates,profits,production cost,sale price,product consumption production cost,sale price,product consumption possibilities,capital recovery plan etc.These are possibilities,capital recovery plan etc.These are the basic elements to be decisive to plants after the basic elements to be decisive to plants after construction and entry into operation which can construction and entry into operation which can be competitive enough with,first of all,local be competitive enough with,first of all,local cement factories and then,imported cement.cement factories and then,imported cement.As I have mentioned above,the Vietnam domestic demand As I have mentioned above,the Vietnam domestic demand for cement in the year 2006 was 32.5 million tons,an for cement in the year 2006 was 32.5 million tons,an increase of 12%compared with the previous year.increase of 12%compared with the previous year.Demand increase is a good condition for cement Demand increase is a good condition for cement manufacturers but the upsurge in the price of most input manufacturers but the upsurge in the price of most input materials is a bad one for them.In the year 2006 the materials is a bad one for them.In the year 2006 the soaring of price of oil and petrol,imported clinker,PVC soaring of price of oil and petrol,imported clinker,PVC bag,freight charge bag,freight charge ectect resulted in cement production cost resulted in cement production cost increase and consequently the cement price has risen 2 increase and consequently the cement price has risen 2 USD per ton on average in the South and 1 USD per ton USD per ton on average in the South and 1 USD per ton on average in the North.At present the average delivered on average in the North.At present the average delivered price of bagged cement in the South is 60 USD per ton and price of bagged cement in the South is 60 USD per ton and respectively in the North is 50-51 USD per ton.respectively in the North is 50-51 USD per ton.This 2007 year the domestic demand is expected to be from 35 to 36 million tons,an increase of 10%compared with last year.To produce 36 million tons cement of all kinds,there will be a need for about 4 million tons of imported clinker.However,the importation of clinker will be gradually reduced year by year due to new projects would come on stream.Before I conclude my paper may I wish all of you good health,successes,happiness;and good success for our conference.Thank you.Presented by Nguyen Van ThienChairman of VNCA