Many localities, ministries and sectors from across the country have been pouring huge investments into the construction of cement plants in the hope of making a high profit from the business.

Recently, the Ministry of Construction asked the Government to limit the granting of investment and construction licenses for new cement projects while asking localities not to build more cement plants.

The request has served as a serious warning of risk factors in selling surplus domestic cement when its prices remain higher than imported cement.

Vietnam now has 40 cement plant projects in progress, with a design capacity of up to 43 million tonnes. In addition, some enterprises and joint-ventures are preparing to break the ground on new cement production projects, raising the total number of such major projects to nine.

Northern Ninh Binh province alone has 4-5 cement plants. On a road section of less than 300 km running from Phu Ly to Nghe An, there are 11 cement plants with a total design capacity of 23 million tonnes per year. In addition, the second production line of the Nghi Son Cement Plant is expected to get off the ground soon on the same section, which is notorious for heavy traffic and high fatal accident rates.

Despite facing certain difficulties in investment, capital mobilization and bidding procedures, cement plants continue to spring up. The construction of two cement plants in Cam Pha and Yen Binh with Vinaconex Corporation being an investor is a typical case in point. The Vietnam Construction and Machinery Installation Corporation (LILAMA) are going ahead with two other projects under the names of Song Thao and Thang Long. It is predicted that more than 30 cement plants will be put into operation in the next three to four years.

As from 2009, Vietnam will produce enough cement to meet domestic construction needs. The country will stop importing clinker and can export a certain volume. Decades ago, the Vietnam Cement Corporation monopolized the cement market but now it only accounts for 43 percent of the total cement production. It is estimated that by 2010 there will be 8 million tonnes of cement in surplus as supply exceeds demand.

Based on socio-economic targets for 2000-2010 set by the National Assembly (average GDP growth rate of 7.5 percent and GDP per capita of around US$1,080 and population by 2010 of 87 million people), the demand for cement is equal to the approved plan but it will be around 4-5 million tonnes higher in the 2010-2015 period. Meanwhile, production capacity in the period will reach its peak as new cement plants will likely operate full blast. So it is necessary to control the construction of new cement plants in order to avoid the risk of surplus cement. The lesson of cement overproduction ten years ago is a reminder of the cement sector’s failure to manage and regulate cement production in the whole country.

What is related to supply and demand is the level of cement prices. If businesses do not find effective measures to reduce production costs, domestic cement will be more expensive than foreign cement. When that happens, it will be difficult for domestic cement plants to compete with foreign ones. Businesses should economize on materials and diversify products to reduce prices and increase competitiveness. Currently, cement plants are mainly located in the north and central areas while cement is mainly consumed in the south. Therefore, how to transport cement quickly from the north to the south is also a hard nut for the cement industry to crack.