In January this year, when the price of clinker plummeted, the author wrote "Who is directing the play between the sharp rise and fall of clinker?" Put forward the view of "imported clinker or the" scapegoat "of the sharp drop in clinker prices". Over the past seven months, the price of clinker in the Yangtze River Delta has risen from 330-350 yuan/ton after a sharp fall in January to 420 yuan/ton. Looking back at the imported Vietnamese cement clinker, what changes have taken place?
Cement clinker exported from Vietnam to China
Exports of cement clinker from Vietnam to China fell sharply in February and March after prices were depressed in January. Of course, in addition to price factors, there are also factors such as the off-season of the Spring Festival in the first quarter and the delayed start of the market. With the opening of the market in April and the recovery of clinker prices, Vietnam's export volume began to increase substantially. In May, it broke the record of a single month, exceeding 1 million tons, accounting for 2.6% of East China's clinker production in that month, compared with 0.04% in the same period last year.
In June and July, the market opened and entered the off-season. Although the total amount of cement clinker exported from Vietnam to China dropped, it still reached more than 600,000 tons, far exceeding the same period last year. By the end of July, Vietnam had exported more than 4.523 million tons of cement and clinker to China in the first seven months, a 79-fold increase over the same period last year.
Figure 1: Quantity of Cement and Clinker Exported from Vietnam to China in Recent 12 Months
Data source: Cement Big Data, Cement Big Data Research Institute
At the same time, the export unit price (FOB) of Vietnam's cement clinker to China is also rising, rising from US $31.58/ton in January to US $38.42/ton in July, and the price continued to rise from April to June, up 23.9% over the same period last year. It is reported that in late August, the price of clinker was 38.5 US dollars/ton, and there are still expectations of further price increases, approaching the highest in history (the highest in history was 41 US dollars/ton in 2012). At present, the cost of clinker from Haiphong Port in northern Vietnam to the coastal areas of East China, together with freight, terminal handling fee and short barge fee, is close to 12.75 US dollars per ton, and the cost of clinker from importers is equivalent to about 390 yuan per ton.
Figure 2: The export unit price (FOB) of Vietnam's cement clinker to China is rising.
Data source: Cement Big Data, Cement Big Data Research Institute
How much Vietnamese cement clinker will enter China in the fourth quarter?
Vietnam has a serious domestic oversupply, with a total cement production capacity of 97.6 million tons in 2017 and a domestic consumption of only 62 million tons, with an oversupply of 36%. Therefore, for many years, Vietnam has got rid of the predicament of serious overcapacity in the industry through exports. In recent years, the total amount of cement clinker produced annually has exceeded 15 million tons, reaching 18 million tons last year, achieving a high utilization rate of cement capacity (81.9%).
In December last year, the Vietnamese government issued Decree No.125/2017/ND-CP, imposing a 0% export tax on cement to stimulate the potential of Vietnam's cement exports. This tariff policy enables exporters to increase their profits by 3 to 4.5 US dollars per ton, which greatly improves the competitiveness of Vietnam's cement exports. In the first eight months of this year, the total amount of cement clinker exported by Vietnam has exceeded that of the whole year of last year, reaching 18.98 million tons (75% clinker), an increase of 56% over the same period last year, of which 70% of the exports went to Bangladesh, China and the Philippines, and China became the second largest export destination, contributing 58.77% to the export growth. In addition, the data show that the Philippines has the highest export unit price among the three countries, exceeding US $45/ton, while Bangladesh is slightly lower than China, at US $32.2/ton. The increase in exports to China has also affected the increase in Bangladesh's export unit price (up 10.4% year-on-year).
According to the estimate of Vietnam Cement Industry Association and the annual target of Vietnam's cement consumption, the annual total output of cement clinker will reach 83 ~ 85 million tons. If the domestic demand growth is not taken into account, it means that the total amount of cement clinker available for export is less than 23 million tons. In fact, Vietnam's domestic cement market is also optimistic this year, with residential construction driving the growth of cement demand, which increased by about 10% in the first seven months. Even if the utilization rate of Vietnam's cement production capacity increases, it is expected to be less than rate of increase in domestic demand, so the author believes that the total amount of cement clinker available for export in Vietnam is about 23 million tons. This means that the total export volume of Vietnam's cement will be about 4 million tons in the next four months from September to December. Bangladesh is the long-term stable export market of Vietnam's cement clinker. Together with the export volume of other markets, less than 50% (about 2 million tons) will eventually be exported to China, which is lower than 1.5% of the clinker output in East China from September to December last year.
Therefore, the author believes that from September to December this year, the impact of Vietnamese clinker on East China is very small and can be ignored. The rise in the export price of Vietnam's own clinker, the shortage of clinker in the domestic supply and stable export market, and the increase in the cost of Vietnam's export to China due to environmental factors (such as limited unloading volume) are also not conducive to the inflow of Vietnam's clinker, which will not hinder the rise in the price of East China in the later period.
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