Vietnam's cement industry is currently facing severe challenges, with the Ministry of Construction reporting sharp declines in production and sales throughout 2023 and into the first eight months of 2024. In 2023 cement production fell to 76.93Mt against a capacity of 143.46Mta in 2022, resulting in the shutdown of 42 out of 92 production lines for up to six months, with some ceasing operations altogether. The situation is expected to worsen in 2024, with production forecast to drop further to 68.19Mt, leaving capacity utilisation at a mere 47.5 per cent.
Previously Vietnam had been viewed as following in China’s footsteps in terms of cement consumption growth, with many expecting it to achieve a high share of cement consumption relative to GDP, second only to China among large economies. While this trend initially held as Vietnam's urbanisation and infrastructure boom drove robust demand, the trajectory shifted earlier than anticipated. Domestic cement consumption peaked in 2010 at 50.2Mt, around the time of the first real estate crisis, and after a brief recovery, volumes peaked again at 63.95Mt in 2018. Since then, the market has entered a more prolonged downturn, with the consumption-to-GDP ratio on a steady decline. This downward trend came to a head in late 2022 following the arrest of a prominent property developer, which froze the real estate market and caused domestic cement demand to plummet 16.4 per cent to 56.62Mt in 2023.
Vietnam’s early success in the cement sector was bolstered by robust clinker exports, particularly to China, which absorbed much of the domestic oversupply. However, this export-driven growth has been significantly undermined as exports to China dwindled. According to the latest data, Vietnam's clinker exports to China were heavily impacted in 2022, dropping from 21.91Mt in 2021 to just 3.2Mt as China scaled back its imports, effectively eliminating 22Mt of demand. This dramatic reduction has left Vietnam grappling with oversupply issues, forcing many producers to curtail or stop production altogether. The drop in exports has returned Vietnam's clinker export volumes to levels not seen since 2015, highlighting the vulnerability of relying too heavily on a single export market.
Outlook
Looking forward, Vietnam’s cement industry faces a challenging path to recovery. The Ministry of Construction has recommended boosting public investment and accelerating infrastructure projects, along with addressing the real estate market's ongoing issues. Additionally, it has suggested greater use of reinforced concrete viaducts in highway projects to help absorb the current cement inventory.
A minor turnaround in consumption is anticipated in 2025, with cement consumption expected to rise a modest 4.5 per cent to 57.18Mt, reflecting early signs of recovery as infrastructure investments begin to take effect. However, a significant uplift in the cement market may not occur until 2026, when cement consumption is expected to see growth of 10.2 per cent to 65.86Mt.
For sustainable progress, industry leaders are calling for government policies that encourage investment in advanced, energy-efficient building materials that align with Vietnam’s broader urbanisation and environmental goals. As Vietnam navigates these complex challenges, a balanced approach between domestic market stabilisation and strategic export diversification will be crucial to reviving its cement industry.
