What’s long, thin and has already exported more than 20Mt of cement in 2018? The answer is Vietnam, which reported this week that it exported 20.1Mt of cement between 1 January 2018 and 31 August 2018. That’s 106 - 112% of its annual ‘target’ in just eight months and around the same amount as it claims to have exported during the whole of 2017. Total cement production in Vietnam was 63.9Mt between January and August 2018, meaning that the country has exported 31.3% of the cement it made over this period. Vietnam itself consumed ‘just’ 43.8Mt. The government target for Vietnamese cement consumption during 2018 is around 65 - 66Mt. That’s basically the amount it has already made.
From a market-led mind-set these targets seem fairly large, huge even, especially the export target. Indeed the concept of such national targets is in itself an alien concept. In most of the world, imports and exports are results of market supply and demand trends, not drivers prescribed by the government.
The reasons behind this apparent desire to export these very large volumes of cement are, therefore, probably best understood from within Vietnam, and we won’t speculate too much on them here. However, Vietnam is clearly determined to continue to produce ever more cement than it can use. In what other country could a major government-owned producer export more than 70% of the cement it makes? In the first half of 2018 Vicem did just that, shipping 11.7Mt of cement overseas from the 14.2Mt that it made.
In 2017 Vietnam’s export target was 15Mt. It ended up smashing this to the tune of 5Mt, 33% more than the target. At the current rate the sector looks like it could overshoot even more spectacularly this year, perhaps hitting as much as 30Mt of cement exports in 2018. This is more than a big European country like Germany can produce! It certainly sounds like a lot but… is it really an exceptional number?
Looking at data from World’s Top Exports (WTEx), which we advise delving into, it seems that this would be a very high number indeed. It reports that a total of 166.6Mt of cement were exported internationally in 2017. It reports that the top exporter was not, as you may by this point have been primed to suggest, Vietnam. It wasn’t even China, as the former number one was bumped into second place (12.91Mt) by Thailand (13.03Mt). Turkey was third (12.79Mt), with Japan fourth (11.93Mt) and Vietnam was listed as fifth (9.53Mt).
All of these biggest exporters except Turkey are in the Far East, an area swamped with cheap cement. China’s average export selling price according to WTEx was US$45/t, against a global average of US$55/t. Thailand undercut it by US$3/t at US$42/t, perhaps explaining its rise to the top spot. Turkey’s average export price was also US$42/t, although it is located in a region that has a lot of saturated markets and others that are growing rapidly. Its average export distance was second only to China’s. Vietnam’s average cement export price was US$51/t, higher than the others. This does not tie in with the apparent rise in exports so far in 2018. This price may have since fallen. Surprisingly, Japan had the lowest export price of the top five exporters by volume at just US$30/t in 2017.
So, to re-answer the question posed two paragraphs above, 30Mt is a very high number indeed. But you’ll have spotted the large discrepancy between WTEx’s 9.53Mt figure for Vietnam, which relies on reciprocal import partner data, and the government’s official line of 21Mt for 2017. One is tempted to ask where the other 50% of the exports reported by the Vietnamese actually ended up, especially given that WTEx reports a US$1.5bn difference in the value of exports and imports across the year. Imports were valued at US$8.8bn but exports were valued at US$10.3bn.
The mystery destination of all that cement, real or imagined, could be the topic of an entire separate column. What appears to be the case at present, is that rampant Vietnamese cement overcapacity is here to stay. The country, as well as Japan, Turkey, Thailand et. al., could stand to benefit in the short term, as China acts ever more aggressively to end its own oversupply situation. However, there could come a time when it has to take its foot off the gas. There are no signs of that yet though.
