Vietnam is up to its ears in cement.
Amid a startling surplus of the product, government agencies are working quickly to figure out ways to offload cement at home and abroad.
Prospects are not looking good.
Vietnam's 20-year industry development plan called for 53 cement factories to come into operation between 2005 and 2010.
Vietnam met its official goals, and then some. Some plants were built or developed outside the scope of the plan.
According to the Ministry of Construction, Vietnam now houses 105 cement plants with a combined capacity of 61 million tons.
This year, the plants are scheduled to produce 55 million tons; output is expected to exceed demand by some five million tons, Chairman of the Vietnam Cement Association Nguyen Van Thien said.
One hard flood
In 2009, Vietnam was featured in the list of the top ten cement producers in the world. The list includes China with an annual output of 1.37 billion tons, India 160 million tons, the US 113 million tons, and Japan 68 million tons.
The cement surplus may represent more than 10 percent of the total output in the next several years, said Le Van Toi, head of the Construction Material Department under the Ministry of Construction.
Thien said that some local governments continue to license new cement projects even though this surplus was forewarned three to four years ago.
The chairman attributes the recent rush on cement plant development to an abundance of small-time investors who purchased low-quality start-up equipment. Thien said these investors were after short-term profits.
He also cited poor local management as a contributing factor to the predicament. "While some cement plant projects were delayed, localities worry about a coming shortage, so they licensed others. When all the projects came into operation at the same time, we were left with a surplus."
The Construction Ministry has recently asked three cement producers Nghi Son in Thanh Hoa Province, Chinfon in Hai Phong City, and Phuc Son in Hai Duong Province "” to export 100,000-150,000 tons in the second half of this year.
The firms will have to unload 50 percent of their output in 2011, and 100 percent in 2012.
Construction Deputy Minister Nguyen Tran Nam said the three joint ventures have committed to export 30-40 percent of their annual output. However, their primary market remains at home.
"Exportation is a solution," Thien said. "But, it is difficult to implement, and it is also not a decisive solution."
Exporting cement can be a losing deal and one not easily made.
Vietnam planned to export some one million tons in 2010. However, the Vietnam Cement Corporation has only managed to ship around 500,000 tons of the products to Laos, and less than 12,000 tons to Cambodia since the beginning of this year.
Thien said Vietnam lacks the necessary maritime infrastructure (e.g. deep seaports and big ships) to move the cement.
Meanwhile, Vietnamese firms are having a tough time trying to break into Asian cement markets because they are surrounded by big exporters such as China and Thailand. Thus, Vietnam can only hope to tap distant markets, like Africa and Brazil. However, cement's going rate, $40-45 per ton, doesn't begin to cover shipping costs, let alone furnish a profit.
Thien added that carving into Vietnam's limestone mountains to furnish materials for cement production will degrade the country's natural landscape.
A way out of the woods
The Construction Ministry has begun a review of the cement industry's development plan.
The ministry has also asked the government to spur domestic cement consumption. "If the usage of cement in road construction is increased, the situation will quickly change," Thien said.
He also suggested that investment in deeper seaports to facilitate shipping the materials from the north to the south should be considered.