The domestic steel and cement manufacturing sectors currently hold a huge amount of unsold inventory due to low consumption in domestic and export markets, high transporting costs, and legal disputes.
According to the Vietnam Steel Association, the unsold steel inventory is around 500,000 tonnes, double the allowable rate; while the Vietnam Cement Association reported that the rate in its industry is as high as 2 million tonnes.
In this new year of 2012, if the real estate sector remains in its frozen state and construction projects are reduced in accordance with cuts in spending, steel and cement consumption will remain low, and clearing bank loans at high interest rates will continue to burden the manufacturers, it was reported.
With the slow domestic market presenting such a challenge, many steel manufacturers have attempted to exploit the export market, but they still have to face many barriers.
In the US market, for instance, local steel exporters have encountered many anti-dumping lawsuits due to their lack of experience.
For its part, the Vietnam Cement Association said the main cause of the high unsold inventory index is the abundant supply against the falling demand caused by delayed construction projects.
The high unsold inventory, plus the low consumption rate, will drive cement makers to the brink of halting production, or even going bankrupt in the near future, the association warned.
While exports seem to be an escape route for the industry, many insiders said this solution is not feasible, since export values are not high, while transportation cost is a major problem.
Meanwhile, Vietnamese cement exporters may also face tough competition from Thai, Chinese, Indonesian, and Taiwanese rivals in certain potential markets, such as Southeast Asia and South Asia.
Moreover, while most of the production lines of Vietnamese companies are newly-invested, the facilities of their rivals have come to complete depreciation, leading to the fact that locally-made products have higher cost prices than those of Thailand, Taiwan, or China.
The situation looks even worse if the exorbitant lending interest rates are counted, the cement association concluded.