StoxPlus is pleased to introduce Vietnam Cement Market 2016 Report, the first and only issued on this industry. This report presents a board range of topics, both sector-specific and cross-cutting market issues.
The research provides latest information on current situation of supply – demand in Vietnam cement sector by analysing two main sources of demand including domestic (infrastructure, civil and residential building), and exporting activities as well as the key development trends, particularly direct sale and consolidation process. Full 15 year forecasts (2015 – 2030) are included in this update. We also pointed out the arising opportunities for foreign investors arising in Vietnam cement market.
Below are the most critical findings in our fourth issue:
1) Still, Vietnam cement market continue to experience the supply surplus with the utilisation rate of only 60% in 2014 if excluding export sale volume. In 2015, Vietnam cement sector witnessed a strong growth of domestic market. However, cement and clinker exporting activities suffered in the same period. Domestically, cement consumption has reached 55.7 million tonnes, posting a growth of 11.3 percent year-over-year. Meanwhile, exporting volume was pegged at 17.8 million tonnes, valuing at US$667mn. Under our base case, which is a prudent scenario based on analysis of macroeconomics and cement demand factors such as the status of infrastructure development and residential sector, we forecast a 7% annual demand growth for cement until 2025.
2) However, the South is still facing a significant shortage in cement supply due to the unavailability of natural resources for producing clinkers. Overall, Vietnam will continue the supply surplus in the coming years, but the situation is more complicated and varies by region. In fact, the North and the Central will continue the supply surplus while the situation is reverted in the South.
3) Amongst cement demand sources, residential construction is considered the main driver for cement consumption in Vietnam, followed by non-residential construction, export and infrastructure development. Particularly, residential construction lifted domestic cement consumption in 2015 and is expected to be in upward trend in the next five years. Meanwhile, infrastructure development is identified as a need for future growth of Vietnam. However, given high budget deficit of Vietnamese government and limited ODA from 2016, available fund for infrastructure is expected to decrease, leading to a fall of 1-2% in cement demand for infrastructure project.
4) Vietnam cement market has witnessed an active consolidation trend recently. Opportunities are open for investors who have long-term interests in Vietnam cement industry. Vietnam cement is very fragmented with the participation of 62 companies, owning 96 factories including both cement plants and grinding stations. Vietnam cement is characterized by 3 groups of players: Vietnam Cement Industry Corporation (VICEM) with 29% production capacity in 2015, respectively, from its 11 member companies; foreign players including Lafarge Holcim, Chinfon and LUKS Vietnam occupying 27% production capacity; and other.
5) Sale Strategies and Pricing Analysis: Different groups of players have different competitive advantages that impact their sale strategies. Particularly, VICEM has the advantage of a SOE in term of size, long history and a strong positioning (largest market share in term of sale revenues in 2015). However, VICEM is rather a collective of multiple cement plants than a corporation in its true self when different brands of VICEM even compete fiercely with one another. Meanwhile, foreign-owned companies like LafargeHolcim and Chinfon has the advantage of size, experience, and capital funding.
6) Costing and Financial Performance: Vietnam cement companies spend high proportion of manufacturing cost on non-renewable fuels, particularly 46% on coals and 15% on electricity. Hence, the manufacturing cost is expected to be on upward trends, resulting in low efficient performance of Vietnam cement sector. Our data showed that historical EBITDA margin on average for 25 public cement companies in Vietnam is at 16.8% in 2015, showing an increase by 1.4% compared to 2014. However, this EBITDA margin is considerably lower than other peers in regions.