Steel price increases make construction contractors suffe

The continued steel price increases recently have dealt a blow to builders. Meanwhile, steel producers are threatening to raise sale prices further, saying that the current sale prices still do not match the ingot steel price increases in the world.

Increasing and increasing all the time

In mid July, the Vietnam Steel Corporation (VSC), Pomina, Vina Kyoei raised sale prices by another 300,000-400,000 per tonne. Prior to that, VSC raised sale prices by 30,000 dong per tonne in the south for coil steel and 180,000 dong per tonne for steel bar. Vietnam-Italia Steel Corporation has also announced the increase of 300,000 dong per tonne applied to all its products.

Reporters’ quick surveys show that coil steel is now retailing at 11.6-11.8 million dong per tonne in HCM City, while bar steel at 11.85-12.1 million dong. In Hanoi, the steel price has nearly reached12 million dong per tonne.

The sharp price increases of steel have made people suffer. Van, a man on Thai Ha street in Hanoi who is building a 5-storey house, complained that the construction material price increases and higher transport fees have forced him to spend hundreds of million dong more on the house.

Contractors of big construction works have also complained that the sharp construction material price increases are threatening them with losses.

Some contractors said that in order to minimise risks, they asked projects’ investors to sign open contracts which include a provision saying that investors will have to share difficulties with contractors if construction material prices increase.

However, it is not easy to persuade investors to accept adjusting the estimates for construction projects. A contractor said that it is impossible to negotiate with investors if prices increase slightly, let alone if prices increase many times.

“Only when the construction material prices go up or down sharply, will the Ministry of Construction make official adjustments on projects’ estimates,” the contractor said.

Domestic steel price increases do not match ingot steel price increases

Pham Chi Cuong, Chairman of the Vietnam Steel Association, said that many countries in the world have entered the economic recovery period, and pushed up the investment in domestic infrastructure development, which has led to the higher demand for steel in the world.

The ingot steel price in the world has surged from $420-430 per tonne to $470 per tonne, while some exporters are offering ingot steel at $500 per tonne.

“The finished steel price increases have not matched the ingot steel price increases, while we still have to import ingot steel in big quantities,” Cuong said.

He went on to say that steel producers incurred losses for a long time as they had to keep prices stable to compete with cheap imports; therefore, they now have to raise sale prices to offset the losses. “The recent price increases are reasonable,” Cuong said.

According to Cuong, in the first seven months of the year, the volume of steel sold increased by 10 percent over the same period of last year (2.3 million tonnes).

It is expected that steel consumption in 2009 will be better than last year. Moreover, a high tax rate is now being imposed on imports so imports will not be a threat to domestically-made products.

Analysts believe that the steel price will keep going up toward the end of the year. Meanwhile, Dinh Son Hung, Deputy Head of the HCM City Institute Development Studies, said that it is not good to see construction material prices increase again at this moment, as this will hinder the price stabilisation policy and have bad impacts on the real estate market, which has just recovered.

Hung has asked the Government to protect the construction material production industry, especially the steel industry for a certain time, at least until the end of 2009, by helping producers reduce losses. When the economy becomes better, the price increases will not cause shocks to the market.

VietNamNet/DT

Tags: Vietnam steel industry, Vietnam steel prices