VietNam Business: tons

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Thursday, February 17, 2011

Businesses commit to price stabilization ahead of Tet

A consumer inspects sugar at the Co.opMart store on Nguyen Dinh Chieu Street in HCMC’s District 3 - Photo: Minh Tam

HCMC – Some 14 enterprises have pledged to join a price stabilization program in HCMC ahead of the forthcoming traditional Lunar New Year holiday, or Tet, despite market volatility in recent times.

The businesses said they had prepared larger stock than that assigned by the city’s Department of Industry and Trade and they are ready to supply the market with 6,000 tons of rice, 11,000 tons of sugar and 4,600 tons of livestock per month.

The companies have also completed goods storage plans to meet customer demands. For instance, meat processor Vissan has plans to launch 2,100 tons of pork, 360 tons of cattle meat and 3,400 tons of processed food in the lead up to the country’s biggest national holiday, higher than those registered with the department at 2,000 tons, 200 tons and 900 tons respectively. Vissan has also put around 2,000 tons of frozen meat in stock.

Saigon Co.op, the owner of the city’s leading retail store chain Co.opMart, has advanced VND300 billion for farms so that they can ensure sufficient food supply and low prices prior to the Tet season during which high demand often drives up prices.

According to the department, local consumers will be able to buy frozen and dried seafood from Ca Mau Province-based Phu Cuong Group at 10% low than market prices. The company says it will meet around 20% of demand in the city although it has got no preferential loans from the price stabilization program.

Phu Cuong is also committed to keeping prices unchanged from now to the end of next March.

The city kicked off the program on June 21 to stabilize prices of eight essential goods within this year and ahead of the upcoming Tet. The city offers interest-free loans to the 14 enterprises to store goods and sell them at prices 10% lower than market levels.

Saturday, February 12, 2011

Business briefs

* Vietnam National Coal-Mineral Industries Group, known as Vinacomin, hired Australia & New Zealand Banking Group Ltd., Credit Agricole CIB and Citigroup Inc. to help advise it on a possible dollar bond sale, according to two people familiar with the matter. Vinacomin has been seeking approval from the government to sell US$500 million of bonds overseas this year.

* Overseas remittances to Ho Chi Minh City from January to September reached $3.04 billion, up 17.94 percent from the same period last year and nearing $3.15 billion for the whole of 2009, Nguyen Hoang Minh, deputy director of the central bank branch in the city, was quoted by Dau Tu (Investment) newspaper as saying. The value for the whole of 2010 is forecast to rise 20 percent, he said.

* Power prices in Vietnam will be adjusted four times a year in accordance with changes in input prices and the exchange rate starting from March 1 next year, the Vietnam Economic Times reported, citing an Industry and Trade Ministry document on implementing a market-oriented mechanism for power prices.

* Vietnam increased its rice export forecast for this year to 6.1 million tons, higher than a previous estimate of 5.9 million tons, according to the Ministry of Agriculture and Rural Development. Shipments from the world’s second-biggest producer may be more than 1 million tons in the fourth quarter, according to the document, which was posted on the ministry’s website.

* Vietnam National Petroleum Corp., known as Petrolimex, will buy 140,000 cubic meters of gasoline and diesel from Dung Quat Oil Refinery this month, said Nguyen Hoai Giang, general director of Binh Son Refinery & PetroChemical Co., which runs the refinery. Previously a Dung Quat official said domestic petrol distributors may not be able to use up the refinery’s inventory by the end of this year and it may face an inventory of more than 720,000 tons of products.

Thursday, January 20, 2011

Oil refinery slips up on poor market forecast

Photo: Tuoi Tre

Failure to precisely forecast demand and supply has left Vietnam’s sole oil refinery with huge volumes of unsold stocks, the state-owned Vietnam National Oil and Gas Group, its operator, said.

The Dung Quat refinery has 750,000 tons of gasoline/oil and 2 million cubic meters of liquefied petroleum gas in stock since domestic demand is 10 percent lower than forecast and the plant’s output is 25 percent higher, Phung Dinh Thuc, general director of PetroVietnam – as the firm is known -- told the media Thursday.

But he did not provide the actual demand and supply figures.

The most practical solution now is to boost demand rather than reduce capacity since the country faces a trade deficit, he said.

At a meeting between PetroVietnam and the Ministry of Industry and Trade earlier this week, the company warned that if measures are not taken to boost exports and domestic consumption, the plant has to cut production due to lack of storage space.

Last month it had asked Quang Ngai Province, where the refinery is located, for permission to expand the plant by 134 hectares to increase its annual capacity from 6.54 million tons to 10 million tons.

But the problem with excess supply dates back to the construction of the plant last year.

It was much delayed and the exact date of its handover by French contractor Technip was not decided until early this year, forcing local oil distributors to sign import contracts.

Thus, while the plant supplies nine out of the 11 petroleum firms in the country but they only buy 30 percent of its output.

In the January-September period, imports of oil products were worth US$4.87 billion, an increase of 4 percent year on year.

The state-run Vietnam Petroleum Corp (Petrolimex), which has a 60 percent retail market share, also has contracts with foreign suppliers and buys only 19 percent of the plant’s output.

It recently became the third distributor to buy directly from the pant after PetroVietnam subsidiaries PV Oil and Petec.

This followed recent complaints by the company that it is illogical for PetroVietnam to require all oil firms to buy Dung Quat’s products through PV Oil instead of directly.

PV Oil charged a high intermediary fee, it also complained.

The Dung Quat refinery has a monthly capacity of 150,000 tons of gasoline, 240,000 tons of diesel oil, 23,000 tons of LPG and others, enough to meet 33 percent of current domestic demand.

It had produced around 5 million tons of products as of last month after reaching full capacity in May.

It has been unable to sell large quantities of jet fuel to local airlines due to red tape.

Last month it shipped 4,500 tons of jet fuel to BP Singapore.

The plant produces six items -- gasoline, diesel, LPG, polypropylene, jet fuel, and fuel oil.

Sunday, January 9, 2011

Cement makers hit by coal shortages

Vietnam Cement Industry Corpo (Vicem)'s member companies need more coal to produce cement, officials from the group have said.

Le Van Chung, chairman of the corporation's management board, said cement factories at the corporation's member companies needed 5,000 tons of coal a day for production, but the Vietnam Coal and Mineral Industry Group (Vinacomin) provided half of their demand at 2,500-3,000 tons per day.

"We had to halt operations temporarily, and if we don't receive an adequate supply of coal in the coming days, many Vicem factories will stop production," Chung said.

Factories in Hoang Thach, But Son, Bim Son, Tam Diep, Hoang Mai, Hai Phong and Ha Tien are experiencing coal shortages.

Hoang Thach Cement Company director Dao Ngoc Binh said his company had three kilns that consume 1,200 tons of coal, but the company had to stop using one kiln on September 27 due to a lack of coal.

The company has about 600 tons of coal in stock, which is not enough to keep the remaining two kilns operational, Binh said.

Cement producers But Son, Bim Son, Tam Diep and Hoang Mai have between 5,000-10,000 tons of coal for production for the next 5-15 days.

The factories acted on their initiative to get more coal for their production, but at the moment, the member companies within Vinacomin did not have enough coal to sell to cement factories, Chung said.

Vicem estimated that the cement industry needed 4 million tons of coal to supply the factories for the remainder of the year, he said.

Cement makers hit by coal shortages

Vietnam Cement Industry Corpo (Vicem)'s member companies need more coal to produce cement, officials from the group have said.

"We had to halt operations temporarily, and if we don't receive an adequate supply of coal in the coming days, many Vicem factories will stop production," Chung said.

Factories in Hoang Thach, But Son, Bim Son, Tam Diep, Hoang Mai, Hai Phong and Ha Tien are experiencing coal shortages.

Hoang Thach Cement Company director Dao Ngoc Binh said his company had three kilns that consume 1,200 tons of coal, but the company had to stop using one kiln on September 27 due to a lack of coal.

The company has about 600 tons of coal in stock, which is not enough to keep the remaining two kilns operational, Binh said.

Cement producers But Son, Bim Son, Tam Diep and Hoang Mai have between 5,000-10,000 tons of coal for production for the next 5-15 days.

Vicem estimated that the cement industry needed 4 million tons of coal to supply the factories for the remainder of the year, he said.

Wednesday, January 5, 2011

Global steel production may plateau in 5 years

Photo: Reuters

TOKYO - Worldwide steel production may plateau over the next five years as a result of environmental pressures and smaller demand increases, one of the world’s top steelmakers said in a report Monday.

JFE Steel of Japan told the Financial Times that annual output would rise as high as 1.6 billion tons by the middle of the decade and then stay roughly constant for 5-10 years.

The flattening of production would result from shortages of key resources as well as the likelihood of only relatively small rises in demand, JFE chief executive Eiji Hayashida told the newspaper.

"In this environment, the pressures will be on steel companies to move to more advanced and valuable forms of steel to suit the needs of new industries, rather than add to production volumes," Hayashida said.

The biggest hindrance to future output rises, according to the JFE chief, would be growing constraints on water and energy supplies amid deepening worries about climate change.

Many steelmakers were also concerned about their ability to pass on to customers the large recent increases in iron ore prices.

This year JFE expects to make 30 million tons of steel, with the figure likely to rise to 33 million tons in 2011 following plant expansions, the Financial Times said.

The World Steel Association trade group opened its annual conference in Tokyo on Monday.

Monday, December 6, 2010

Business briefs

* Prime Minister Nguyen Tan Dung has ratified the amended Vietnam-US Air Transport agreement signed four months ago, which will help airlines of the two countries expand operations, especially cargo flights.

* Trade between Vietnam and Myanmar in the first eight months of this year surged 58 percent from a year earlier to US$73 million, of which Vietnam’s exports totaled $23 million, up 67 percent, Myanmar customs data show.

* Mekong Aviation Joint-Stock Co., a Vietnamese private air carrier that has partnered with Skywest Inc., will start flights from October 9, offering eight routes to popular tourist destinations in the country. Air Mekong, as it is also known, will increase the number to ten routes from November, the airline said on Wednesday.

* The government will lend Vietnam Oil & Gas Group US$300 million to pay debt to BNP Paribas SA, online newswire VnEconomy reported, citing a finance ministry circular. The company, known as PetroVietnam, borrowed the money from the French bank in January 2007 to build Dung Quat, Vietnam’s first oil refinery.

* Vietnam Shipbuilding Industry Group, known as Vinashin, has disbursed about VND400 billion to help its units maintain and boost operations, said Nguyen Quoc Anh, acting chief executive officer. The money is being used to pay salaries and social insurance for employees. The cash comes from selling assets during restructuring and loans, Anh said.

* Vietnam plans to spend VND57.4 trillion (US$2.9 billion) over the next decade to develop the seafood sector, the government said on Tuesday. By 2020, the country expects seafood export turnover to reach as high as $9 billion a year and total seafood output to reach between 6.5 million tons to 7 million tons.

* The Vietnam Steel Association expects the volume of steel used for construction in September to fall below 400,000 tons, from 483,000 tons in August, the Vietnam Economic Times reported, citing Nguyen Tien Nghi, vice chairman of the association. Companies have cut steel prices by between VND200,000 and VND400,000 per ton.

Wednesday, October 13, 2010

Imbalance in steel industry

Imbalance in steel industry At first glance, the figures do not make sense.

Vietnam has a surplus production of about three tons of steel every year, and yet, every year, it also imports four million tons of the alloy.

The mystery is easily solved, but the problem is not.

The surplus production is of construction steel and imports are of steel billets needed for industrial production.

“The rampant development of construction steel mills has created a surplus. Their combined capacity is some eight million tons per annum, far exceeding the demand of five million tons,” Dinh Huy Tam, general secretary of the Vietnam Steel Association, told Thanh Nien Weekly.

Meanwhile, investment in turning out steel for industrial sectors like ship building and mechanical production is still limited, so Vietnam has to import most of the products. Each year, the country imports some 4 million tons of hot-rolled steel to serve these sectors.

According to a recent report by the Ministry of Industry and Trade, the country has 74 steel projects with a combined investment of nearly US$22.2 billion in 30 cities and provinces.

However, none of these are plants that can turn out steel for industrial sectors. “Construction of some projects has been delayed,” Tam said.

Investors are not keen on producing steel billets because of the large investments and high technological requirements involved, said Le Manh Hoan, vice director of steel producer Dinh Vu.

The investment capital for a plant producing this kind of steel needs at least $500-600 million, much higher than the $100 million or so needed for a construction steel factory.

The investment exceeds a local firm’s capacity, so they need to cooperate with other firms to get involved in the business, said an industry insider. However, such cooperation has not been looked into seriously.

Rising imports

Tam said it was only after 2000 that some firms began producing steel billets, but their output only meets 60 percent of the local demand.

The mills produce some three million tons of steel billets each year, much lower than their designed capacity of 4.5 million tons. Some small-scale mills lack the ability to run at maximum capacity, while others are learning still about the technology that they have just begun applying, Tam said.

Firms often import steel scrap to produce steel billet instead of getting the raw material from mines, said Tam. As of now, the Thai Nguyen Steel Mill is the sole producer of billet from mines, with an output of some 250,000 tons each year.

Sunday, October 3, 2010

Trade ministry: Rice still ample for export this year

HCMC - Strong foreign demand has pushed up reference prices of export-standard rice by US$50 per ton, but the trade ministry confirmed there would be no rice shortage for export this year.

Deputy Minister of Industry and Trade Nguyen Thanh Bien, who is in charge of managing rice exports, told the Daily after a review meeting on Tuesday on exports in the last four months that there is still one million tons of rice in stock. Furthermore, the commercial rice volume will increase in the upcoming harvest, he said.

“In the coming harvest, the country expects to have an additional 3.5 million tons of rice, including 1.5 million tons of commercial rice. We will weigh the situation to decide the amount for export till the end of this year,” Bien said.

However, Bien declined to comment on some predictions that the rice export volume this year could jump to a record high of seven million tons despite the ample inventory. In June, the Vietnam Food Association (VFA) suggested to raise the export target by half a million tons to 6.5 million tons of rice.

Pham Van Bay, vice chair of the association, said the total export in July and August has increased considerably from the same period last year. He estimated that export in September will be steady at between 700,000 and 800,000 tons.

The total rice export in the January-August period amounted to 4.8 million tons valued at more than US$ 2 billion.

Currently, rice exporters are increasing purchases from farmers owing to strong foreign demand.

In August, VFA raised the reference price three times by US$50 per ton. For the 5%-broken rice, the guiding price is at US$450, while that for 25%-broken rice is US$410 per ton. However, the number of rice exporters signing contracts at these prices is insignificant.

“The guiding price is applicable to both contracts under government-to-government agreements for major markets such as the Philippines, Iraq, and Cuba, as well as to commercial contracts,” Bay added.

Currently, all food traders are asked to observe the reference prices determined by VFA from time to time when signing contracts with foreign rice buyers.

Friday, September 24, 2010

Cement surplus

Cement surplus 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.”

Exporters dilemma

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.

Friday, August 27, 2010

Sugar prices seen stable till end-September

HCMC - Vietnam’s sugar prices will stay stable until the end of September when the 2010-2011 sugar-cane crop starts, according to the Vietnam Sugar Association.

The general secretary of the association, Ha Huu Phai, said there had been nearly 127,000 tons of sugar in the country’s stock as of August 15.

The last months of the year would not see a sugar shortage as the Mekong Delta would start their 2010-2011 sugar crop from September 15; and other provinces would enter their crops in late October at the latest.

Statistics of the sugar association show 46,100 tons of sugar was sold in the market from July 15-August 15, while more than twice as much, or 100,000 tons, was sold at the same time last year to meet the demand of mid-autumn festival cake bakers.

Phai said the fall in sugar sales during the mid-autumn festival this year was due to the Ministry of Industry and Trade allowing confectionary and soft drink producers to import sugar to make up the 2010 import quota of 300,000 tons.

The move had aimed to help stabilize consumer prices.

“The Ministry of Industry and Trade must find ways to urge those businesses that are allowed to import sugar to import their full allocated amount so that sugar prices stay steady,” Phai said.

However, there have been fluctuations in sugar prices since the beginning of the year. The sugar price in the world market reached US$900/ton at the end of 2009, then suddenly dropped to US$470/ton in March 2010. While many businesses have yet to import sugar, the price surged to USD800/ton in July.

According to Pham Thi Sum, management board chairwoman of the Bien Hoa sugar joint stock company, due to the low volume of sugar left in ASEAN countries, Vietnamese businesses must import sugar from Brazil or other South American countries with the tariff of 30-40%. Sugar imported from those countries would be sold at over VND18,000/kg, an increase of VND1,000 compared with the current price.

The association anticipates the 2010-2011 sugar crop will yield around 900,000 tons comparable to the 2009-2010 crop, meaning Vietnam would also need to import 300,000 tons in 2011.

Sunday, August 22, 2010

Vietnam to ship 100,000 tons of rice to Bangladesh

Vietnam to ship 100,000 tons of rice to Bangladesh Vinafood 2, Vietnam’s major rice exporter, said it has signed a contract to sell 100,000 tons of medium-grade 15 percent broken rice to Bangladesh.

The Ho Chi Minh City-based company, also known as Vietnam Southern Food Corporation, will provide the grain at US$389 per ton.

The company described the South Asian country as a burgeoning market. Bangladesh recently imported 178,000 tons of rice from Vietnam and plans to buy another 200,000 tons. Vietnam is now the most competitive rice supplier for Bangladesh, the company said.

However, it noted that some competitive Vietnamese exporters are beggining to undercut each other. The tactics have led the national food association to caution its members against predatory pricing.

Vinafood 2, the industry giant, has asked the government to give it the right to oversee the whole Bangladeshi market. If the government agrees, Vinafood 2 will have final approval over all export contracts to the country and will be responsible for assigning contracts to other exporters.

Vietnam is set to meet this year’s rice export target of 6 million tons, Nguyen Thanh Bien, deputy minister of industry and trade, said this week.

Vietnam's rice exports rank second only to Thailand. The nation has shipped more than 4 million tons, valued at around $2 billion so far this year, according to official figures.

Saturday, August 21, 2010

Ample rice supply boosts exports beyond annual target

Ample rice supply boosts exports beyond annual target Vietnam may ship 7 million tons of rice this year, 17 percent higher than the annual target, as there is ample supply of the grain, an agriculture official said.

The country has harvested more than 26 million tons of paddy so far this year and is set to reap another 13 million tons in the remaining months, Nguyen Tri Ngoc, director of the Cultivation Department at the agriculture ministry, told the Vietnam Economic Times Monday.

He said there would be sufficient rice for the domestic market even if 6.5-7 million tons of rice were exported this year. Local food companies have stocked around 1.4 million tons of rice, he added.

Vietnam, the world’s second largest rice exporter after Thailand, had planned to export 6 million tons of the grain this year. So far, more than 4 million tons valued at around $2 billion have been shipped, according to official figures.

Ngoc said there is no need to worry about rice supplies in Vietnam now, but the country is short on other grains used as animal feed.

Vietnam still has to import huge amounts of corn and soya bean meal, he said.

Friday, August 20, 2010

Cashew sector faces serious material shortage

The lesson of lack of raw materials has recurred in the cashew sector with the raw cashew shortage forecast to hit 150,000 tons, according to the Vietnam Cashew Association (VINACAS).

This year’s cashew output was only 300,000 tons, 50,000 tons less than the previous crop due to bad weather and the shrinkage of cashew acreage in the southeastern region.

VINACAS said the situation has taken place for many years as local cashew farms were capable of meeting only 60 percent of processors’ demand and the country had to import between 200,000-250,000 tons of raw cashew nuts from Africa .

To reach the target of exporting 190,000 tons of cashew nuts for US$1 billion by the end of this year, the country needs 700,000 tons of raw cashew nuts. So far this year, enterprises have imported over 120,000 tons of cashew.

However, imports of raw cashew nuts were difficult as the world cashew output decreased 20 percent, making the prices of raw cashew increase by 30 percent over the same period last year, equal to $1,000 per tonne.

VINACAS has asked the government to assist cashew processors with capital to buy raw materials and consider reducing the tax on raw cashew imports to zero percent.

In the first seven months of the year, Vietnam exported about 100,000 tons of cashew nuts, earning $531 million, a year-on-year increase of 5 percent and 23 percent, respectively.

Vietnam has been the world’s largest cashew exporter, making up 37 percent of the global market. Vietnamese cashew products have been exported to over 40 markets, with the US and the Netherlands being major markets.

Thursday, February 17, 2011

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