VietNamNet Bridge – Despite the reported high inventories, investors still pour money into cement projects.

A report by the Ministry of Industry and Trade showed that the cement inventories had increased by 51.3 percent, or four million tons, by the end of October. Meanwhile, tens of trillions of dong still have been spent to… increase the inventories.

Two new cement plants have been scheduled to become operational in 2013, which means that 2.7 million tons of cement more would be launched into the market a year.

In fact, the Ministry of Construction, which anticipated the oversupply, in early 2010 sent a dispatch to local authorities, requesting them to stop licensing new cement projects.

However, more cement projects still have been kicked off since then, because the investors had got investment licenses by that time already.

Dau Tu has reported that in early October, Fico Cement Company in Tay Ninh province began the geological exploration in the Dau Tieng protective forest area, a preparation step to build the second production line with the capacity of 1.5 million tons a year.

In Ninh Binh province, the 100 percent Taiwanese Lucky Group is nearly completing the first production line with the designed capacity of 1.8 million tons. Meanwhile, the investor has got the investment license for the second production line which has the same capacity.

According to the Ministry of Construction, the Trung Son cement plant with the capacity of 0.91 million tons would be put into operation in the first quarter of 2013. It is very likely that the 1.8 million ton Quang Phuc Cement Plant would also become operational by that time.

Analysts say that the average investment rate is 130 dollars per ton. This means that investors have decided to spend 350 million tons to build more cement plants which would “help” increase the inventories.

Dau tu has quoted its reliable sources as saying that if the Thang Long Investment and Trade Corporation succeeds in its negotiations for loans, the construction of the Thanh Son Cement plant invested by the corporation, which started in March 2008, would be completed in the fourth quarter of 2014. The project has the total investment capital of 1.4 trillion dong.

Manufacturers have expressed their worry that the cement oversupply would become even worse when new cement plants become operational in the next year.

Dien Dan Doanh Nghiep has quoted its sources as saying that six million tons of cement would be redundant this year. The currently operational plants have the designed capacity of 70 million tons and expect to churn out 60-62 million tons. Meanwhile, the domestic demand would not be higher than 47-48 million tons.

Luong Quang Khai, President of the Vietnam Cement Corporation, said the new cement plants would make the market competition stiffer and inventories higher, because the supply has increased rapidly, while the demand has not increased accordingly.

Meanwhile, Khai said, the investment rate has increased sharply because of the sharp increases of the input material prices. Coal price, for example, has increased by 170 percent, electricity 19 percent and oil by 40 percent.

Commenting about the stiff competition, Dao Ngoc Binh, General Director of Vicem Hoang Thach said some cement plants in Hai Duong province are dumping cement products by up to 500,000 dong per ton to take back the investment capital. The sale at below the production cost has put big difficulties for other cement plants

Compiled by Thu Uyen