Image: Mr. Eamon John Ginley - General Director of INSEE Vietnam
1. What do you think about the challenges of the building materials market today?
The building materials industry faces a lot of serious challenges from both the supply and demand sides in recent years:
From supply side:
- For the basic building materials like cement, steel, etc., increasing input costs, especially coal and other energy prices, have quickly and significantly eroded margins, forcing many manufacturers to a net loss operating position and even forcing the reduction and/or closure of production lines. Further cost increases from EVN will add more pressure to margins, and price increases are necessary to ensure the Industry remains profitable. Vietnam needs cement to grow, but the cement business requires a lot of capital for plants, which takes years to re-pay – so a fair level of profitability in the Industry is required to ensure sustainable & reliable supply for the long term.
From demand side:
- Cement demand has decreased in Southern Vietnam on a year-on-year basis, particularly since Q4 of 2022, when the issues with the Corporate Bond market became more apparent. The pressure from this issue on the Real Estate sector has caused the overall construction Industry to slow dramatically. The lack of liquidity to the real estate sector also leads to a general reluctance for partners in the cement supply channel to extend any further credit to retailers, etc – so that also causes the retail cement market to contract – putting even more pressure on all players in the Industry.
2. As far as I know, the clinker production is clearly unbalanced in the South and North markets, what are the consequences?
Clinker is the key ingredient in cement, and this is manufactured in cement plants using clay and limestone as raw material feeds. There is a very large over supply of clinker plants in the Northern area of Vietnam, and an undersupply in the South. However, the logistics distance and subsequent costs of getting clinker from North to South are substantial, and that means the best cost and sustainable solution for cement supply in Southern Vietnam is to have the clinker made locally, as close as possible to the market. It is also the best environmental solution, as the CO2 emissions associated with shipping the materials some 1,600 – 1,800 km’s from the Northern plants is substantial – especially when they do not have a high use of alternative fuels to replace coal. At INSEE we currently replace up to 40% of our coal use with alternative fuels, offering a good sustainable solution for a number of waste material problems, but also a CO2 reduction overall in our cement products.
These are some of the reasons INSEE is in the process to secure the necessary approvals for a clinker production line 2 at our Hon Chong site, with the latest cement plant technology to serve better for the customers in Southern of Vietnam.
3. If the Hon Chong Plant - Line 2 were put into operation, what will it contribute to the development of Kien Giang Province?
Hon Chong Line 2 will mean additional tax revenue for the Provincial Authorities, and additional employment for people to run the new line, more business for the various contractors and suppliers that we need as part of our business.
In addition, it will help solidify the overall INSEE operations at Hon Chong, which already have a proud record of 25 years of contribution to local Government and Community, while always striving for the best performance from an environmental and plant operation perspective, but also from a people development perspective. People are our most important asset, and we will continue to offer great job opportunities for people from the Kien Giang Province, and to help develop them. Our EVE apprentice training program is a great example of that, as it has been running 22 years and already delivered 253 trainees, 100% of which came from the KG Province.
Hon Chong 2 will ensure that INSEE has an even stronger presence in the local Community for many years ahead.
4. As a long-term investor here, can you please share your thoughts about the investment environment in Kien Giang province?
- This year is the 25 years anniversary of our Hon Chong cement plant which is the great example for successful FDI project here with the total investment capital up to approximately 7,100 billion VND until 2022
- In 2019, INSEE was awarded the Investment Registration Certificate by the Kien Giang People's Committee for the Hon Chong Lines 2 & 3 to expand our clinker capacity. This is considered as one of the turning points to help INSEE take further steps in the future.
- We receive lots of support from People Committee, various departments such as Department of Planning & Investment, Department of Construction, Department of Natural Resources & Environment, etc. as well as the close attention and support from People Committee of Kien Luong District, the people of Binh An’s and Binh Tri’s communes.
- INSEE really looks for your continuous supports as we complete all the legal process in order to build our new Hon Chong Line 2.