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Steel, cement makers suffer massive unsold stocks
  • | Tuoi tre | April 09, 2012 10:07 PM

With demand for steel and cement still in a steep decline, manufacturers, distributors and dealers of these two commodities are struggling to survive due to huge unsold inventories.

“Though it is the high season for construction, demand still dropped by 40 percent compared to last year, resulting in a bigger loss,” lamented S., who runs a large steel distributing facility on Ho Chi Minh City’s Ly Thuong Kiet Street.

The distributor used to stockpile thousands of tons of steel, but the figure is now only some 100 tonnes, she said.


“Of the 15-person workforce that loads the products, only three remain,” added Khang, who manages the 300-square-meter warehouse of the facility.


“In 20 years of working here, this is the gloomiest time I have experienced.”


Similarly, steel dealers and retailers on Bach Dang, To Hien Thanh, and Phan Xich Long streets also said they have sold almost no products over the last few weeks.


“The steel stocked in the warehouses has all become rusty,” said Yen, owner of Thanh Thien store on Ly Thuong Kiet Street.


Meanwhile, the company that transports the goods said they only have to work once or twice a week, while the figure used to be three times daily.


Meanwhile, dealers and distributors of certain cement manufacturers such as Ha Tieng 1, Song Gianh, Holcim, Nghi Son, and Cam Pha are also suffering from low consumption.


“I used to sell up to 800 cartons a week at this time last year,” said Mai, whose cement dealer is located on Van Kiep Street.


“But selling 40 cartons a week is now the best I can do.”


The warehouse, which is large enough to stockpile 2,000 cartons of cement, now has plenty of empty space, since goods are only stocked when manufacturers cut prices or offer discounts, said Mai.


Similarly Phuong, owner of the Loan Phuong construction material store, said her trucks have sat unused for several months.


“How could the business survive when demand has dropped by 40 percent compared to the same period last year, when the market was already sluggish?” Phuong said sadly.


Out of control


There are several dozen steel manufacturers under the Vietnam Steel Association (VSA) with unsold inventories ranging from a dozen to hundreds of thousands of tons, according to figures obtained by Tuoi Tre.


Sold products have been on a steady decline since the beginning of this year, forcing some businesses to operate at only 60 percent of their design capacity.


Six manufacturers have even ceased production due to the slowed consumption.


D, chairman of a major HCMC-based steel maker, admitted that the unsold stock of his company is around 200,000 tons.


“Given a normal market development, such an inventory would be acceptable,” said D.


“However, amid this economic slowdown, businesses cannot survive with the figure.”


D said the unsold stockpile is worth some USD100 million, with each ton of steel fetching $470.


“With this huge sum, plus the bank interest, and transport and labor cost, I lose dozens of billions of dong every day,” lamented D.


Meanwhile, the CEO of another cement maker said that players in the cement manufacturing market have been fighting each other for survival, since “all are on the verge of bankruptcy.”


The chief, who wants to remain anonymous, said manufacturers have been offering unprecedentedly high commissions, plus a series of promotional programs to attract dealers and buyers.


“Buyers will get 9 to 13 cartons of cement free of charge for each order of 100 cartons, but consumption is still low,” he shared.


Figures from the Vietnam Cement Industry Corporation (VICEM) show that consumption has slumped by 26 percent year on year.


Unofficial statistics show that many producers have incurred losses worth thousands of billions dong, VICEM said.


“Those with the steepest losses are manufacturers who have used bank loans to install new production lines.”

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