Construction materials’ prices trouble contractors

Steel has increased in price. The prices of cement and other construction materials are going to increase. Real estate investors cannot raise prices, because contracts on selling apartments have already been signed.

According to Pham Chi Cuong, Chair of Vietnam Steel Association, construction steel is now at 13.2 million dong per ton, while other types are selling at 12.5-12.7 million dong per ton.

Cuong noted that electricity and petrol prices have also both increased, while scrap steel has risen by $15-30 per ton and the dong has been depreciated. All these factors have led to the 10% increase in steel prices.

According to Cuong, some 600,000 tons of steel have been sold thus far in 2010. “Consumption will increase sharply towards May and then will decrease in the rainy season before increasing again in the third quarter of the year,” Cuong explained.

The steel price in HCM City has also increased. Steel is now selling at 11.81-12.34 million dong per ton, in comparison with 11.62 and 12.19 million dong in January 2010. Forecasters believe that steel price will rise further as demand increases.

Other construction materials’ prices have not increased sharply, because producers are “listening to the news.” Cement is now under the hardest pressure to raise prices. Due to stiff competition, cement producers have not decided when to raise them. Analysts say that the prices not only depend on production costs, but also on supply and demand.

Nevertheless, in the context of the gloomy real estate market, it is not easy to raise prices on apartments.

Le Chi Hieu, General Director of the Thu Duc Housing Development Corporation, remarked that it is unfeasible to raise prices, which forces real estate developers to seek other solutions to offset the construction price increases. Hieu maintained that enterprises need to cut down expenses by controlling input materials carefully and applying modern construction technologies.

But raising apartment prices will be unavoidable once construction material prices go too high. In Hanoi, the investor of CT2 apartment bloc in Van Khe new urban area, unexpectedly announced a raise in prices by 12 percent, even though clients have paid 95 percent already.

A client revealed that the apartment contracts were signed in late December 2007 at 6.52 million dong per square metre, but now the company has unilaterally raised the price to 782,400 dong per square metre.

Explaining the increase, Song Da 6 Company complained that construction materials have increased too sharply, citing how the steel price has gone up 20 percent over what it was when the contracts were signed.

VietNamNet/DTCK

Tags: Vietnam Construction, Vietnam Construction materials market, Vietnam Construction materials’ prices