Cement industry facing the pressure of fuel price increase

Along with the pressure of raising electricity prices, fuel prices, adjusting the VND/USD exchange rate, price of coal sold to cement households has risen by 40% since the beginning of April, which has added a greater burden to cement enterprises. According to Mr. Nguyen Van Thien, Chairman of Vietnam Cement Association, currently, the total energy costs account for 45% - 50% of cement production costs. An 18% increase in gasoline price, a 15.3% increase in electricity price and a 40% increase in coal price have made price of cement increase by 10% to 15%. On the other hand, increasing the VND/USD exchange rate by 9.3% and raising interest rates (some cement plants have to borrow capital with the interest rate of above 20% per year) have caused great difficulties for cement plants, especially for cement projects which have become mature. The increase in the VND/USD exchange rate and interest rate has made the price of cement increase by 12 to 15%. Thus, electricity, coal, oil, exchange rate and interest rate have made cement price increase by 22 to 30%. From late 2010 until now, cement industry has been unable to withstand the pressure of rising prices of coal, electricity, fuel, VND/USD exchange rate, interest rate on bank loans ... If no price adjustments are made to partially offset the cost due to increases in prices of factors mentioned above, the cement industry will not survive; this year, it will lack resources to repay domestic and foreign investments. In 2011, Vietnam Cement Industry Corporation (VICEM) is expected to pay a debt of VND 3,200 billion; Cam Pha cement plant has to pay a debt of VND 800 billion... Therefore, the plants have been forced to adjust prices to offset part of the cost due to increases in prices of inputs mentioned above. Mr. Thien added that this time, the price would increase by VND 120,000 per ton (about 10% of cost), there has been no salary adjustment for employees despite the rise of inflation and consumption index. According to Mr. Le Van Chung, Chairman of the Board of VICEM, in 10 recent years, Vietnam's cement price has been the lowest in ASEAN, steady at USD 50 per ton or less than USD 50 per ton, while the average cement prices of other ASEAN countries are usually USD 65 to USD 75 per ton. Cement industry is always conscious of keeping cement prices and supplies stable to help curbing inflation, stabilizing macro-economy. From 2008 to now, the price of cement has increased by only 13% to 15% while coal price has doubled; prices of electricity and gasoline have also been rising continuously... A more serious problem is that, along with the price increases, electricity and coal industries can ensure the supply of only 70% of electricity and coal demands for cement production. Moreover, power cut will stop clinker kilns from operating, causing stagnancy for production lines and large losses for cement plants. The most worrying is that if electricity and coal can satisfy only 70% of demands, the source of cement for construction shall lack about 30%. To overcome difficulties in input price increases, Mr. Chung said VICEM had directed unit members to actively seek all possible measures to reduce production costs, especially saving energy. Accordingly, along with the revision of consumption norms of materials, fuels such as electricity, coal, petroleum, shell ..., cement plants have reschedule the operation of production lines and devices which use much power such as stone crushers, material grinders, cement grinders... so that they operate only in low-load hours.

Besides, VICEM has urgently speeded up the project of utilizing extra heat of the clinker kiln to generate electricity at Hoang Thach and Tam Diep cement factories. VICEM strives to 2014 so that all the cement factories of the Corporation shall install devices that utilize extra heat of the clinker kiln to generate electricity, and can self-supply 18% to 20% of electricity for production.