Vietnam clinker exports rebound strongly, but domestic weaknesses remain

Cement sales in Vietnam dropped sharply in February 2024, contracting 46 per cent MoM to 2,221,315t, according to the Vietnam National Cement Association (VNCA). Sales also reported a sharp 45 per cent contraction compared to a year earlier. Of the total, VICEM companies saw sales down 41 per cent MoM and 43 per cent lower YoY, to 700,572t. Other VNCA-affiliated companies report contractions of 42 per cent MoM and 48 per cent YoY, to 460,743t. Non-VNCA members reported sales of 1,060,000t, down 50 per cent MoM and 46 per cent YoY.

Total exports shrank 37 per cent MoM in February, 2,020,605t and were down 33 per cent compared February 2023. Clinker exports were down 41 per cent MoM and 36 per cent YoY to 864,213, with VICEM reporting exports of 124,352t, up a notable 141 per cent MoM and 131 per cent YoY. Other-VCNA-affiliated companies also reported strong export growth of 103 per cent MoM and 209 per cent YoY to 60,216t. Meanwhile, clinker exports shrank for other producers, contracting 51 per cent MoM and 47 per cent YoY. Cement exports fell 34 per cent MoM and 31 per cent YoY to 1,156,392t in February. VICEM exported 33 per cent MoM and 50 per cent YoY less at 155,039t, other VNCA members reported a 31 per cent MoM contraction, but a 11 per cent YoY increase to 214,101t. Non-VNCA members saw exports contract 35 per cent MoM and 32 per cent YoY to 787,252t.

January-February 2024
In the year-to-date so far, total cement sales were 6,330,824t, down seven per cent compared to the January to February period of 2023. VICEM companies reported a 10.2 per cent YoY contraction to 1,880,239t, other VCNA members saw a 10.5 per cent YoY fall to 1,260,585t, and non-members reported a 2.9 per cent YoY decline to 3,190,000t. In the first two months of 2024, total exports rose six per cent YoY to 5,234,959t, with clinker exports rising a robust 20 per cent YoY to 2,323,554t. Clinker exports by VICEM companies rose 51 per cent YoY to 176,051t, other VCNA-affiliated companies reported a 361 per cent YoY jump to 89,824t, and non-members saw clinker exports rise 15 per cent YoY to 2,057,679t. Cement exports shrank three per cent YoY in the first two months of 2024 to 2,911,405t, with VICEM companies noting a 23 per cent YoY fall to 386,259t, other VCNA-members saw cement exports rise 37 per cent YoY to 386,259t, and non-member companies reported a five per cent YoY contraction to 1,999,109t.

Outlook
Vietnam cement sales show a shaky start to 2024. Severe weather conditions in January, including sustained heavy rainfall, and Tet Holiday, the Vietnamese New Year, which ran from the 8-14 February will have weighed on domestic sales. GDP growth is forecast to accelerate to 5.8 per cent YoY in 2024, from 4.7 per cent in 2023, according to the IMF. However, highly-leveraged real estate developers and tight credit conditions remain hinderances to stronger economic growth and domestic cement sales. The State Bank of Vietnam, SBV, has set a credit growth target of 15 per cent for 2024, up from total credit growth of 13.5 per cent in 2023, however lending contracted 0.6 per cent MoM in January, with households remaining particularly cautious.

Public investment is an upside for domestic cement sales. The government has allocated VND657trn (US$26.8bn) for public investment in 2024, most of which targeting transport infrastructure projects, including the Long Thành International Airport Project, The T3 Passenger Terminal Package at Tân Sơn Nhất International Airport and accelerating the five projects in the East-West Expressway.

Meanwhile, cement and clinker exports are expected to remain important bolsters to the sector, ensuring capacity utilisation rates, currently trending around 59 per cent, remain viable. Cement exports jumped 27.1 per cent YoY in 2023, and clinker exports have started the year strong, rebounding robustly, after shrinking 31.5 per cent YoY in 2023, with VICEM and VNCA-affiliated companies increasing their market share. Non-VNCA members account for 89 per cent of sales, down from 99 per cent in February 2023. Indeed, Vietnam is expected to remain the largest exporter of cement and clinker in the world, though there are a number of downside risks, not least weak demand from China amidst its economic slowdown and real estate crisis.