A cement production line. (Photo. Hoang Nguyen/VNA)

The economy recovered together with the Government requesting ministries and local agencies to accelerate disbursement of public investment capital, which are favorable factors for the domestic cement production industry.

However, with the cost of input materials increasing sharply, while accounting for a large proportion in the composition of cement production, it is “eroding” the profits of enterprises in this industry.

Input costs soar

According to Agribank Securities Joint Stock Company (Agriseco), the world commodity market has formed a strong uptrend since 2020 when the COVID-19 pandemic broke out. This has had a great impact on many businesses, especially the cost structure of input materials.

Some basic commodities such as oil, gas, and coal have increased and peaked in recent years. While coal accounts for more than 30% of the cost of raw materials and 18% of the cost of cement production .

The main reason for this price increase comes from two factors including a strong recovery in demand as economies return to post-pandemic normality; The global supply of goods is being affected by supply chain disruptions caused by the COVID-19 epidemic and global geopolitical tensions.

Countries racing to source coal imports, which are in short supply due to years of declining investment in new mines, have pushed world coal prices to a new record this year. Spot coal prices at Australia’s Newcastle port – the main coal supplier to Asia – hit $400/ton for the first time in June 2022.

[Cement exports continue to face difficulties in the second half of 2022]

The Refinitiv CoreCommodity CRB Index – a composite index of the prices of 22 major commodities has surged over the past two years. If only in 2022, this index had the strongest increase of more than 40% at the time.

According to data of the Department of Building Materials (Ministry of Construction), cement consumption in the domestic market, especially for export, decreased sharply due to fierce competitive pressure on prices and the high price of coal fuel.

In July 2022, it is estimated that cement product consumption will only reach about 5.95 million tons, down about 27% compared to July 2021; of which, domestic consumption is about 4.85 million tons; exports are estimated at 1.1 million tons.

Generally in 7 months of 2022, the consumption of cement products is estimated at 54.99 million tons, down about 17% compared to the same period in 2021; in which, domestic consumption is about 36.84 million tons, down about 3% over the same period in 2021.

Export of cement products in 7 months was only estimated at 18.15 million tons, down by 30% compared to the same period in 2021. Department of Building Materials said that, currently, in the past 7 months, the country’s inventory of about 5.9 million tons, equivalent to 25-30 days of production, mainly clinker.

China and the Philippines are the two main export markets of Vietnam’s cement and clinker, both of which have reduced the import of products from Vietnamese suppliers in the first half of 2022. The reason is that China still maintains the policy of “Zero-COVID”. ,” along with the country’s real estate market is in a state of decline, which has caused cement consumption in China to drop sharply in recent times.

With the second largest cement export market, the Philippines, is also affected by difficult shipping and high freight rates.

Department of Building Materials, at the end of June 2022, the domestic selling price of cement increased from 60,000-80,000 VND/ton depending on the type and brand, due to the high price of coal.

According to the Vietnam Cement Association, while production costs increased sharply, but the export price of cement products did not increase, making cement exporters face fierce price competition.

Businesses reduce profits

VICEM Ha Tien Cement Joint Stock Company (stock code: HT1) has just announced its business results in the second quarter of 2022 with a total revenue of 2,525 billion dong, up 10% compared to the first quarter. Profit after tax of the business industry reached 136 billion, down 43% over the same period.

Cement production at Quan Trieu Cement Joint Stock Company VVMI. (Photo: Hoang Nguyen/VNA)

Accumulated in the first 6 months, VICEM Ha Tien achieved 4,597 billion dong in revenue, after-tax profit sharply decreased by 52% over the same period, to 160.7 billion dong.

According to the document of the General Meeting of Shareholders in 2022 of Bim Son Cement Joint Stock Company (stock code: BCC), 2022 will continue to be a fiercely competitive year for cement enterprises  due to the large oversupply in the market compared to the market. With demand, the supply of cement remained high at about 107 million tons, while the domestic demand for cement was only about 64-65 million tons.

The export market is forecasted to still be difficult, cement and clinker importing countries continue to implement policies to protect domestic production, erect technical barriers to trade, and increase freight rates…

At the same time, the demand for bag cement is lower than bulk cement, reducing the advantage of VICEM Bim Son brand, leading to a significant impact on production and business results.

In fact, in the second quarter of this year, Bim Son Cement Joint Stock Company had a profit before tax that decreased by 38.88%, equivalent to nearly VND 48 billion compared to the same period in 2021.

According to the Vietnam Cement Association, under the pressure of increasing input costs such as coal and gasoline prices, from March to the end of July, the cement industry had to increase selling prices three times, with an increase of all three times from 220,000-270,000 VND/ton depending on the brand.

However, this increase has not eased the burden of input costs for cement producers, there has been a situation where a few factories have had to stop clinker grinding furnaces because the more they produce, the more they lose.

From a positive perspective, Agribank Securities Joint Stock Company (Agriseco) said that promoting public investment is also a driving force for cement businesses to improve business results from a low base in 2021.

In particular, at the meeting of the Prime Minister’s Working Group 4 on inspecting, urging and accelerating the disbursement of public investment capital in 2022 at a number of ministries, branches, agencies and localities recently, Deputy Prime Minister General Le Van Thanh has asked ministries, branches and localities to strive for full disbursement in December 2022, which will contribute to consuming a large amount of cement.

According to KB Vietnam Securities Joint Stock Company, public investment is expected to create a driving force for economic recovery. According to the General Statistics Office, if public investment increases by 1%, GDP will increase by 0.058%, so the Government has had drastic and effective plans to speed up the disbursement of public investment and promptly handle it. handle bottlenecks with the goal of ensuring 100% disbursement according to the assigned plan.

In addition, the State Treasury is also more flexible in controlling investment capital expenditure with two mechanisms: Control first, pay later; pay first, control later, and at the same time shorten the capital payment time, in order to create maximum conditions for disbursement so as not to miss a beat in the economic recovery process and stop the accumulation of disbursements at the end of the year. .

On the stock market, along with the negative business results and the downward movement of the general market, from the beginning of the year until now, many cement stocks have plummeted.

Closing the trading session on August 12, HT1 was priced at 16,650 VND/share, down nearly 30.3% compared to the closing session on the first day of January 4. Other codes like BCC dropped more than 34.6%, BTS fell 27.5%%, HOM dropped 20.2%./

Source: Vietnamplus.vn