The prices of building materials increased highly, causing the progress of many construction projects to be behind the schedule. (Photo: SGGP)
Building material prices increase every day
It was recorded at building material stores in Ho Chi Minh City on the afternoon of May 11 that steel prices hit a new high, exceeding VND19,000 per kilogram, and there were signs of a local scarcity of steel coil whereas the supply of steel bars remained plentiful. In the same period in 2019 and 2020, the prices were around VND12,000-VND13,000 per kilogram. Hence, steel prices have increased by about 50 percent.
“Sometimes the steel dealers quote prices up twice a day. Because the steel prices increase hour by hour, only when the buyers agree to close the deals, do we import steel products and deliver them directly to the construction sites. To get a good price, buyers have to pay in cash, if they want to defer payment by week as before, the prices are a bit higher,” Mr. Nguyen Vu Khanh, owner of Binh Phat Building Materials Store in District 12 shared.
“Currently, Hoa Phat steel products have the highest increases. Construction contractors are complaining to us, but the price increase is due to the factories and dealers, so we also have to raise the prices in tandem,” the representative of S.T. Building Materials Store on Phan Huy Ich Street in Go Vap District said.
In Hanoi, the prices of building materials are standing at the highest level in history. In which, iron and steel prices had the highest increase, with up to more than 45 percent. In provinces in the Southeast and Mekong Delta regions, steel prices and many other construction materials are also increasing.
According to Mr. Nguyen Van Hong, the owner of a building materials store in Long Thanh District in Dong Nai Province, starting before the Lunar New Year until now, prices of all kinds of construction materials in the area such as steel, cement, sand, and stones, have risen rapidly, especially the prices of steel products increased, on average, by 40-60 percent. For instance, previously, the price of steel sheets was about VND14,000 per kilogram, but the current price is about VND26,000 per kilogram. Meanwhile, other building materials, such as sand, stone, cement, and bricks, also climbed by 20-30 percent on average.
The risk of increasing real estate prices
Facing this fact, 40 enterprises in Ca Mau Province simultaneously signed an appeal to the provincial People's Committee and related departments and agencies, proposing to adjust the prices of construction materials and labor to be close to the current actual prices.
Mr. Trinh Duy Dung, Director of Hong Duc Co., Ltd, Ca Mau Province, said that some contractors estimated steel price at just over VND11,000 per kilogram, but when winning the bid, the market price has risen to VND19,000 per kilogram and is expected to continue to surge. If this situation prolongs, contractors will face many difficulties.
Meanwhile, according to Mr. Nguyen Quoc Hiep, Chairman of the Association of Construction Contractors, rising construction materials, especially steel, have a significant impact on construction costs, because, in a building, steel accounts for 20 percent of the proportion of construction materials.
He added that if construction materials continue to escalate, it will certainly affect the cost prices of construction products. Specifically, it will increase real estate prices, especially apartment buildings, causing affordable housing to be even rarer in the market.
It was recorded at building material stores in Ho Chi Minh City on the afternoon of May 11 that steel prices hit a new high, exceeding VND19,000 per kilogram, and there were signs of a local scarcity of steel coil whereas the supply of steel bars remained plentiful. In the same period in 2019 and 2020, the prices were around VND12,000-VND13,000 per kilogram. Hence, steel prices have increased by about 50 percent.
“Sometimes the steel dealers quote prices up twice a day. Because the steel prices increase hour by hour, only when the buyers agree to close the deals, do we import steel products and deliver them directly to the construction sites. To get a good price, buyers have to pay in cash, if they want to defer payment by week as before, the prices are a bit higher,” Mr. Nguyen Vu Khanh, owner of Binh Phat Building Materials Store in District 12 shared.
“Currently, Hoa Phat steel products have the highest increases. Construction contractors are complaining to us, but the price increase is due to the factories and dealers, so we also have to raise the prices in tandem,” the representative of S.T. Building Materials Store on Phan Huy Ich Street in Go Vap District said.
In Hanoi, the prices of building materials are standing at the highest level in history. In which, iron and steel prices had the highest increase, with up to more than 45 percent. In provinces in the Southeast and Mekong Delta regions, steel prices and many other construction materials are also increasing.
According to Mr. Nguyen Van Hong, the owner of a building materials store in Long Thanh District in Dong Nai Province, starting before the Lunar New Year until now, prices of all kinds of construction materials in the area such as steel, cement, sand, and stones, have risen rapidly, especially the prices of steel products increased, on average, by 40-60 percent. For instance, previously, the price of steel sheets was about VND14,000 per kilogram, but the current price is about VND26,000 per kilogram. Meanwhile, other building materials, such as sand, stone, cement, and bricks, also climbed by 20-30 percent on average.
The risk of increasing real estate prices
Facing this fact, 40 enterprises in Ca Mau Province simultaneously signed an appeal to the provincial People's Committee and related departments and agencies, proposing to adjust the prices of construction materials and labor to be close to the current actual prices.
Mr. Trinh Duy Dung, Director of Hong Duc Co., Ltd, Ca Mau Province, said that some contractors estimated steel price at just over VND11,000 per kilogram, but when winning the bid, the market price has risen to VND19,000 per kilogram and is expected to continue to surge. If this situation prolongs, contractors will face many difficulties.
Meanwhile, according to Mr. Nguyen Quoc Hiep, Chairman of the Association of Construction Contractors, rising construction materials, especially steel, have a significant impact on construction costs, because, in a building, steel accounts for 20 percent of the proportion of construction materials.
He added that if construction materials continue to escalate, it will certainly affect the cost prices of construction products. Specifically, it will increase real estate prices, especially apartment buildings, causing affordable housing to be even rarer in the market.
Increasing building materials affect negatively real estate prices. (Photo: SGGP)
The prices of construction materials go up, leading to an increase in the price index of construction works. It not only affects the ongoing construction works but also makes it difficult for several projects that are preparing to bid. Currently, many bidding packages have not been contracted because they are waiting for steel prices to be finalized, affecting the project progress. Construction enterprises are expecting the Government to have solutions to regulate prices or specifically guide the steel price compensation for each slippage in prices.
Depending on the global market?
According to the Vietnam Industry Agency under the MoIT, the reason for the price increase is that Vietnam's steel industry largely depends on imported raw materials, including iron ore, scrap steel, and coking coal.
It is expected that in 2021, Vietnam will continue to import 18 million tons of iron ore, about 6-6.5 million tons of steel scrap, and about 6.5 million tons of coking coal. The prices of these raw materials remain at a high level, so they will certainly directly affect steel manufacturers and the domestic steel market.
Mr. Nguyen Ngoc Thanh, Deputy Director of the Vietnam Industry Agency, added that China is currently cutting production of finished steel products, as well as steel billets and hot rolled steel to protect the environment, thus affecting the supply. Besides, the prices of raw materials for steel production have increased drastically in the global market due to the impacts of the Covid-19 pandemic and longer delivery time.
The Vietnam Steel Association also forecasts that because the pandemic continues to develop and has not been controlled thoroughly in the world, it will continue to affect the supply and prices of steel in the domestic market. In May, steel demand remains at a high level. The selling prices may hike further to compensate for the increasing input material prices.
Besides, the Organization for Economic Cooperation and Development (OECD) assessed that the global economy will recover in 2021, with a growth rate of 4.2 percent. For the steel industry, according to the forecast of the World Steel Association, the global crude steel production and consumption will recover and grow by 4.2-4.5 percent. However, demand in emerging markets, except China, is expected to jump 9.4 percent, which is also one of the reasons for steel prices to rise.
Deputy Prime Minister Le Minh Khai has just requested ministries and agencies to study and take measures to increase the capacity of domestic finished steel production, aiming to basically meet domestic demand; study to adjust the imbalance in the supply of steel products in the market to prioritize the domestic market through adjusting and balancing the export volume of finished steel products.
Depending on the global market?
According to the Vietnam Industry Agency under the MoIT, the reason for the price increase is that Vietnam's steel industry largely depends on imported raw materials, including iron ore, scrap steel, and coking coal.
It is expected that in 2021, Vietnam will continue to import 18 million tons of iron ore, about 6-6.5 million tons of steel scrap, and about 6.5 million tons of coking coal. The prices of these raw materials remain at a high level, so they will certainly directly affect steel manufacturers and the domestic steel market.
Mr. Nguyen Ngoc Thanh, Deputy Director of the Vietnam Industry Agency, added that China is currently cutting production of finished steel products, as well as steel billets and hot rolled steel to protect the environment, thus affecting the supply. Besides, the prices of raw materials for steel production have increased drastically in the global market due to the impacts of the Covid-19 pandemic and longer delivery time.
The Vietnam Steel Association also forecasts that because the pandemic continues to develop and has not been controlled thoroughly in the world, it will continue to affect the supply and prices of steel in the domestic market. In May, steel demand remains at a high level. The selling prices may hike further to compensate for the increasing input material prices.
Besides, the Organization for Economic Cooperation and Development (OECD) assessed that the global economy will recover in 2021, with a growth rate of 4.2 percent. For the steel industry, according to the forecast of the World Steel Association, the global crude steel production and consumption will recover and grow by 4.2-4.5 percent. However, demand in emerging markets, except China, is expected to jump 9.4 percent, which is also one of the reasons for steel prices to rise.
Deputy Prime Minister Le Minh Khai has just requested ministries and agencies to study and take measures to increase the capacity of domestic finished steel production, aiming to basically meet domestic demand; study to adjust the imbalance in the supply of steel products in the market to prioritize the domestic market through adjusting and balancing the export volume of finished steel products.
