VietNamNet Bridge - Many large construction projects have resumed work, while coal prices have decreased, helping to cut production costs. Cement manufacturers see great opportunities to revive their business.

Ha Tien 1 Cement Company is negotiating with Indonesian partners on importing coal from Indonesia, the Saigon Securities Incorporated (SSI) quoted CIMB in its report.

Coal is the input material which accounts for 40 percent of clinker and 32 percent of cement production costs. Ha Tien 1 is considering importing coal because the coal price has fallen sharply in the world market, following the drop in crude oil prices.

Ha Tien 1 buys coal from Vinacomin at $100 per ton. The coal price in Indonesia is $52 per ton only FOB (free on board).

If Ha Tien 1’s proposal to import coal gets approval from the government, the cement manufacturer would have opportunities to cut production costs, and therefore, reduce sale prices and boost sales which have been going very badly over the last few years.

Analysts noted that if Ha Tien 1 can import one-fourth of total coal it needs for production, it would be able to reduce production cost by 8 percent, which would help Ha Tien 1 improve its business performance.

It is still unclear if Ha Tien 1 can get the government’s nod on its coal import plan. Under the current laws, businesses must seek permission for the import of energy products.

However, sources said some other cement manufacturers are considering following Ha Tien 1’s move to import coal instead of using Vinacomin’s coal. 

Some analysts support the coal import plan, saying the government should not help Vinacomin maintain the high coal prices even though it needs to protect domestic production.

The cement industry in the last few months has seen sales increasing on higher domestic demand. Many large road projects have kicked off or resumed work.

According to the Vietnam Cement Association, cement sales in the first two months of the year were 20 percent over the same period last year. Meanwhile, Ha Tien 1 has reported a 30 percent sale increase.

The sharp depreciation of the euro also has “given cement manufacturers a hand”. The currency value has dropped to a 12-year low. One euro was exchanged for VND26,130 on December 31, 2014, and VND22,900 on March 11, 2015.

It is expected that Ha Tien 1 would make a net profit of VND200-250 billion thanks to exchange-rate fluctuation. Bim Son Cement, according to BIDV Securities Company, may see high profits of VND416 billion.

TBKTSG