Proposal to delay the increase of clinker export tax

Recently, Vietnam Cement Association (VNCA) has sent a document to the Prime Minister proposing to delay the deadline for increasing clinker export tax from January 1, 2023 according to Decree No. 101/2021/ND-CP.

Talking to reporters of Investment Newspaper, Chairman of VNCA, Mr. Nguyen Quang Cung said that in 2022, the cement industry has been facing extreme difficulties, production costs increased sharply and export volume dropped significantly. The price of imported coal increased significultly, making production inefficient. In 2023, it is forecasted the situation will be even more difficult, if the clinker export tax is increased to 10%, production enterprises cannot bear it.

Previously, clinker products (heading 25.23, codes 2523.10.10 and 2523.10.90) were proposed by the Ministry of Finance to increase export tax from 5% to 10%. Particularly for cement products, because they are not included in the tax bracket, they are not subject to export tax.

The Ministry of Finance argued that the increase in clinker exports depletes domestic resources, causing many negative impacts on the environment during the mining process. "On the other hand, cement and clinker production in Vietnam is using electricity at low prices," emphasized by a representative of the Ministry of Finance.

​In 2020, Vietnam exported nearly 33 million tons of cement and clinker, of which clinker reached 24 million tons (accounting for 73%), cement exports reached 8.7 million tons (accounting for 27%).

In 2021, the total consumption of cement and clinker in Vietnam is 108.4 million tons, an increase of 8.26% compared to 2019. In which, domestic consumption 62.7 million tons, up 0.95%, export 45.7 million tons.

It is worth mentioning that, of the total export volume of 45.7 million tons, only 16.8 million tons of cement were exported, the remaining nearly 29 million tons were clinker, the proportion was still very large.

Cement and clinker are produced from the main raw materials of limestone, clay and iron-rich ore additives, using a large amount of coal and electricity as non-renewable resources. Therefore, it is acceptable to exploit a part of natural resources to develop the country in a certain period, but if this happens for a long time, it will cause loss and depletion of resources.

If exporting is required, priority should be given to cement, gradually reducing the amount of clinker exports.

“Clinker exports will reduce at least 30-35 % of the value and Vietnamese businesses do not benefit the added value of the finished cement, and waste their invested capital due to not utilizing full capacity of cement grinding system", the Cement Industry Report 2021 stated.

Increase of cement export, reduction of clinker export

In the most favorable option, if the Government agrees to delay the implementation of the clinker export tax, this is only a short-term solution. With a manufacturing industry with the third largest production scale in the world, only after China and India, with the designed capacity of the production lines currently more than 110 million tons of cement per year, but domestic consumption is just below 65 million tons, large oversupply continues to put great pressure on manufacturers.

Exporting cement, clinker solves the problem of excess supply, but side effect is the more export, the more deficit in resources, energy and environmental impacts.

​In that context, exporting is almost the only choice. But in the long term, in order for cement to become an export sector that brings more value and is not labeled as an export of non-renewable resources, businesses need to adjust the export rate, increase the export of cement and reduce clinker export. When switching to export and sell more cement, it means escaping export tax.

Mr. Ha Quang Hien, Chief of Secretariat Office of Vietnam National Cement Corporation (VICEM) released the corporation would try to negotiate with partners, focus strongly on orders of cement export to have high export prices and sharply reduce clinker exports.

Enterprises with export activities recognize that when exporting, every business wants to sell cement, but it is not always achivable,  it also depends on the importer and many other factors. Moreover, in the current oversupply condition, the clinker produced still has to be exported. Enterprises cannot stop the kiln or reduce output. Therefore, even knowing that exporting clinker at low price, the enterprise still must sell.

Information from a large cement producer with a number of factories in the North and Central region said that the average selling price of clinker is only 37.5 USD/ ton, while the export price of bulk cement is about 49-50 USD/ton.

Compared to last year, the export price of 2022 has increased slightly, but there are also exporters who cannot negotiate to increase prices and accept losses due to the price of materials and input fuel for cement production increased, especially coal prices this year were over 300% compared to 2020.

The cement industry report published earlier this year also pointed out the fact that the export of a lot of cement and clinker is only a temporary solution and timing, focusing only on a few enterprises that have a favorable position to export products, because profits of export  are not high, due to low selling prices and high logistics costs./.                                                                                                                                                                                                                          (Theo Báo Đầu tư)