Because of the increasing costs of imported materials, the cement sector must raise retail prices in the domestic market to prevent further losses, according to the Vietnam National Cement Corporation. Since the beginning of the month, Ha Tien 1 and Ha Tien 2 cement companies, who fall under the corporation, have been permitted to increase cement prices after keeping their price tags stable for 10 years, the corporation said. Import prices of electricity, petrol, oil and transportation costs are on the rise, leading to an unavoidable VND33,000 (US$2.1) per tonne increase in the construction material’s price, the VNCC’s general director, Nguyen Van Hanh, said.

The corporation made the decision after a series of joint-venture cement companies such as Nghi Son, Holcim and Chinfon Hai Phong raised selling prices by VND25,000 - 40,000 ($1.58 - 2.52) per tonne. Hanh said the adjustment would not have serious impact on the construction market, adding that the corporation had made thorough market research to gain a deep understanding of market demand before making the decision.

According to the Vietnam Cement Association, cement does not belong to the list of commodities of which prices are regulated by the State. Thus, cement producers are entitled to adjust prices suitable to market realities, except in the case where the State wants to take measures to stabilise prices.

A representative of Holcim joint-venture company said increasing cement prices at this time was indispensable, helping enterprises to maintain production and ensure profits. If the price was not raised, the company would lose almost VND90,000 ($5.67) for each tonne of cement produced, he added.

Due to pressure from rocketing prices of imported materials, Ha Tien 1 company’s profits fell from VND216 billion ($13.6m) in 2004 to VND65 billion ($4.1m) last year, the company said.

The VNCC’s decision to increase cement prices is basically a move in line with creating a new pricing level, which still does not cause any negative impact on the construction investment environment. The Ministry of Construction asked enterprises not to lift up prices by more than five per cent, otherwise the domestic market would be disrupted, the VNCC’s deputy general director, Vu Van Hiep, stressed. Adjustment of cement prices in accordance with the global market’s common fluctuations help raise cement producers’ awareness to enhance their competitiveness given Viet Nam’s WTO accession, said Nguyen Ngoc Dung, deputy general director of Phuc Son Cement Company.

The market’s demand for cement this year is forecasted to go up by 12-13 per cent over last year’s demand, thus the country has to import an additional 1.3Mt of clinker. The price of imported clinker is expected to continue to rise by 30 per cent, making it hard for cement producers to maintain profits at levels gained last year, the company added.