Mega Infrastructure Projects Like Long Thanh Airport and North-South Expressway: A Boost for the Cement Industry in 2024?

Large public investment projects such as the Long Thanh Airport and expressway projects in the Central and Southern regions are expected to compensate for the cement consumption demand in 2024.

Mega Infrastructure Projects Like Long Thanh Airport and North-South Expressway: A Boost for the Cement Industry in 2024?
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However, the economy still faces internal risks, especially the slow recovery of the real estate market, which could continue to impact consumption and increase bad debts in the banking sector. The National Assembly has approved a public investment plan of 677,300 billion VND for 2024, an 18% increase over the 2023 plan, not including disbursements from the Economic Recovery and Development Program. Assuming 95% of the 2023 plan is disbursed and about 40,000 billion VND is transferred from the Recovery Program, total infrastructure spending for this year could reach 710,000 billion VND.

SSI highlights that a new aspect of 2024 could come from the implementation of Resolution 106/2023 by the National Assembly, aimed at supporting the deployment of road infrastructure projects with a three-year effect. This includes simplifying administrative procedures and resolving legal issues, such as easier access for contractors to quarries for expressway construction.

Cement Consumption and Export Market:
The cement industry faces challenges with declining domestic demand and an oversupply situation, with the real estate market yet to recover. According to the Vietnam Cement Association (VNCA), national cement consumption in 2023 reached nearly 90 million tons, a 7% decrease from the previous year, with domestic consumption down by 10% and exports nearly unchanged. SSI expects cement consumption to hit a low in Q1 2024 and gradually recover thereafter. The first quarter's consumption is predicted to be low due to seasonal factors like the Lunar New Year holiday and weak demand. However, from Q2 2024, cement sales are expected to improve due to signs of recovery in construction activities.

Competition and Price Pressure:
The supply of cement continues to exceed demand, with Vietnam's cement production capacity at 120 million tons/year, while the demand is only about 65 million tons. This leads to fierce competition among manufacturers, potentially driving down cement prices. SSI predicts that the gross profit margin of cement manufacturers will hit a low in Q1 2024 but will gradually improve in the following quarters. However, profits may remain weak due to slow recovery in consumption and unchanged management and sales costs.

Source: CafeLand