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Construction companies dealing with rising materials prices

Construction companies dealing with rising materials prices

Monday 10, 05 2021
Construction companies in Vietnam are facing the risk of bankruptcy due to the sudden increase in materials prices in the first quarter of 2021.

Construction materials prices surged

According to the Vietnam Association of Construction Contractors (VACC), construction companies nationwide are facing the risk of bankruptcy due to the sudden increase in steel prices in the first quarter of 2021, especially in April.

Specifically, the price of Viet My 6 mm-diameter steel in the fourth quarter of 2020 was 13,145 VND per kg; however, this type of steel in Da Nang is now sold at 18,370 VND per kg, meaning there has been a rise of 40%. Meanwhile, the steel price announced by the Da Nang Department of Construction is only 13,805 VND per kg. VACC affirmed that not only Viet My steel but all steel brands have simultaneously raised their prices from 30% to 40% compared to the last quarter of last year. The association also stated that all construction contractors are now facing difficulties with the current situation and have no solution. The contractors have to deal with the deficit on their own.

Steel

Aside from steel, other construction materials such as sand, gravel, and especially cement also experienced a rise in price within the past few months. The result from surveys conducted at materials shops on Cat Linh street, Hanoi, showed that the current price of cement ranges from 1.2 to 1.3 million VND a ton. Specifically, the prices of cement types are: But Son - 1.13 million VND a ton, Vissai PCB30 - 1.05 million VND a ton, Xuan Thanh PCB40 - 1.23 million VND a ton, etc. According to the Vietnam Cement Association (VCA), from mid-April, Cong Thanh Cement Trading Co., Ltd. has raised the price of cement to increase by 30,000 VND a ton. Similarly, from April 21, Bim Son Cement Joint Stock Company and Hoang Mai Cement Joint Stock Company also announced a raise of 30,000 VND a ton, applied to the PCB30, PCB40 cement. Many cement producers such as Hoang Long Cement Joint Stock Company, Xuan Thanh Cement Joint Stock Company, and Long Son Cement Company also increase their selling price by 40,000 VND per ton.

Cement

Impacts on construction companies

The increase in the price of construction materials is affecting many construction companies in Vietnam. Construction contractors will still have to deal with a difficult situation in the coming time, as forecasts show that steel prices will continue to rise until the third quarter.

Specifically, according to information from the Vietnam Steel Association (VSA), steel prices in recent times have risen dramatically. Forecasts previously depicted that steel prices will only reach maximum until the end of the second quarter of 2021. But now, according to VSA, things are changing. Steel prices are predicted to continue to increase until the end of the third quarter of 2021. For each civil construction project, steel accounts for 10-30% of the total project value, so the price fluctuation of this item has a strong impact on contractors. Many construction companies and contractors said that the steel prices increase since the beginning of 2021 has seriously affected the performance of their signed projects with partners, hence narrows the ability to contract new projects.

Impacts on construction companies

Not only private projects but projects using state capital also face difficulties. They have to apply the unit price of materials as notified by the Department of Construction, but this price notice is not up to date with the rate of price increase in the market.

Covid-19 has slowed down the construction industry throughout the year 2020. Now, just as construction companies start their recovery and restart their projects, the construction industry has once again shrunk due to the high price of steel and other construction materials.

VACC has petitioned for an investigation in the cause of rising materials prices. Hopefully, with an early direction from concerned ministries, construction companies in Vietnam will soon overcome this phase of hardship.

 

Compiled by VietnamCredit

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