HANOI, June 1 (Xinhua) -- Decreased demand and increased costs have put cement makers in a difficult spot financially, said industry insiders and experts, Vietnam News reported on Thursday.
Demand for cement in Vietnam has been on the decline given the fact that the country's total production capacity of 111 million ton is twice as much as its annual demand, the report said.
Already scrambling to respond to competition from existing factories and more new entrants to come into the marketplace, waning local and global demand has put the cement industry under even more pressure, said industry analysts.
Local sales dropped 16 percent to 18.6 million tons in the January-April period from a year ago, while exports slumped 24 percent to 10.4 million tons, according to the Vietnam National Cement Association.
The cement data, which indicates the impact on the real estate sector that account for about 15 percent of Vietnam's economy, showed cement makers have been struggling with higher interest rates and a slowdown in sales.
Vincem Ha Tien Cement, a leading cement manufacturer, recorded a consolidated net loss of 85.6 billion Vietnamese dong (3.6 million U.S. dollars) in the first quarter as a result of higher interest rates and slumping sales.
Listed Bim Son Cement also suffered a loss of 48.6 billion dong in net profit over the period due to revenue contraction and expansion in financial and operational costs.
State-run Vietnam Cement Industry Corporation said the demand for cement and clinker products at home and abroad fell nearly 20 percent in the first quarter compared to a year ago.
The contraction of Vietnam's industry and construction sector is one of the factors that caused GDP to grow at the second lowest rate since 2011, statistics data showed.
Besides, as cement is an energy-intensive industry, the recent hike in retail electricity prices would add to the difficulties faced by cement makers. A 3-percent hike in electricity prices can result in a profit decline as large as 13 percent for the industry, according to experts.