Construction site in Ninh Binh of the North-South expressway. (Photo: VNA) Hanoi (VNS/VNA) - Although local iron and steel prices have dropped, they arestill at high rates, up 1.7 times compared to the end of 2020, causinginvestors and construction contractors to suffer.
On the international market, the price of steel rebar for October delivery onthe Shanghai Future Exchange was traded at 5,687 yuan (877 USD) pertonne on Monday, down nearly 5.64 percent from the peak set inmid-May but surged 30.8 percent since the beginning of the year.
As the global prices are higher, local steel producers can onlyraise their product prices, said Mai Minh Ngoc, director of Dong Hai SteelCompany.
Nguyen Cong Chinh, an iron and steel dealer on Giai Phong street,Hanoi, told Tien Phong that hisbusiness has never been as difficult as this year. Every two-three days, steelprices rise and even climb twice a day.
"Sometimes, wholesale distributors informed me that the prices were upright after I opened the store," Chinh said.
"This year, steel prices have increased by 1.7 times so far."
In June, the local steel price quotes at around VNĐ16,200 - 16,500, dependingon products and enterprises, Vietnam Steel Association (VSA) said. The pricerose nearly 50 percent year-on-year.
Earlier this month, many steel producers announced they would reduce steelprices by VNĐ300 per kg, but the drop is not much, some dealers said.
The recent report from VSA showed that steel production reached over 2.5million tonnes in June, down 12.21 percent month-on-month. Steel sales werenearly 2.1 million tonnes, down 15.35 percent compared to May.
Regarding construction steel, the report cited that the output was 847,279tonnes in June, down 21.04 percent month-on-month but up 5.2 percentyear-on-year. Meanwhile construction steel sales reached 655.046 tonnes, down31.36 percent monthly and 18.1 percent year-on-year.
VSA expected that construction steel sales will struggle in July as therainy season is coming and many construction projects are delayed due tothe COVID-19 restrictions and losses because of higher steel prices.
The Vietnam Association of Construction Contractors emphasised that allconstruction contractors faced difficulties, there is no way to solve them asthe majority of private contractors used fixed price contracts, so they can'tbe changed, except for cases of force majeure.
Therefore, contractors have to deal with these problems by themselves, whilestate-funded projects must apply the material prices according to the noticesof the Department of Construction but these notices are not up-to-date.
Tran Bao Thach, Deputy Director of Hanoi Housing Investment and DevelopmentCorporation, said that as steel price accounts for 30 - 35 percent of aconstruction's value, and can be up to 40 percent in big projects, contractorshave suffered huge losses.
"For example, currently the market price of construction steel is 18,000 VNDper kg, while the price quoted by the Department in the first quarter is 13,250VND," Thach said.
"We lost nearly 5,000 VND per kg for a State public project. If theproject uses 100 tonnes of steel, then we lose approximately 500 millionVND."
"Many businesses are going bankrupt while small companies don't dareto attend bids or do anything."
"Most projects now are stagnant."
Similarly, contractors building the North-South expressway also feel the heatfrom the rising iron and steel prices.
Nguyen Minh Khiem, General Director of 319 Corporation, which is constructingthree key projects including Mai Son - National Highway 45, Cam Lo - La Son andMy Thuan - Can Tho, said that as it is a fixed price contact, it is verydifficult for the contractors as material costs keep rising.
Moreover, many provinces have not yet licensed enterprises to exploit land andwaste dump sites, as well as required payment for dumping, creating morechallenges.
"Now we are stuck between a rock and a hard place. If we don't work, theproject will be behind schedule, but if we continue, we will lose money,"Khiem said.
Meanwhile for private projects, if investors can't share the additionalexpenses from higher material prices, customers will be the ones to bear theburden.
"We can only wait for instructions from the Ministry of Construction tosee if there is any adjustments in steel prices," Thach added.
After the Ministry of Construction issued an official dispatch directingprovinces to report the situation of construction steel prices, recently, the VietnamAssociation of Construction Contractors sent an official letter to the Ministryof Construction proposing to adjust steel prices.
The association proposed that with the bidding package using State budget, theMinistry of Construction coordinated with the Ministry of Planning andInvestment and the Ministry of Finance to issue a circular guiding theadjustment of iron and steel prices.
In addition, the Department of Construction is assigned to coordinate with theDepartment of Finance of provinces to adjust prices each month during the timewhen iron and steel prices spike.
For bidding packages using other capital sources, it is recommended thatinvestors and contractors negotiate when there is a difference in pricedepending on contracts and construction volume./.
On the international market, the price of steel rebar for October delivery onthe Shanghai Future Exchange was traded at 5,687 yuan (877 USD) pertonne on Monday, down nearly 5.64 percent from the peak set inmid-May but surged 30.8 percent since the beginning of the year.
As the global prices are higher, local steel producers can onlyraise their product prices, said Mai Minh Ngoc, director of Dong Hai SteelCompany.
Nguyen Cong Chinh, an iron and steel dealer on Giai Phong street,Hanoi, told Tien Phong that hisbusiness has never been as difficult as this year. Every two-three days, steelprices rise and even climb twice a day.
"Sometimes, wholesale distributors informed me that the prices were upright after I opened the store," Chinh said.
"This year, steel prices have increased by 1.7 times so far."
In June, the local steel price quotes at around VNĐ16,200 - 16,500, dependingon products and enterprises, Vietnam Steel Association (VSA) said. The pricerose nearly 50 percent year-on-year.
Earlier this month, many steel producers announced they would reduce steelprices by VNĐ300 per kg, but the drop is not much, some dealers said.
The recent report from VSA showed that steel production reached over 2.5million tonnes in June, down 12.21 percent month-on-month. Steel sales werenearly 2.1 million tonnes, down 15.35 percent compared to May.
Regarding construction steel, the report cited that the output was 847,279tonnes in June, down 21.04 percent month-on-month but up 5.2 percentyear-on-year. Meanwhile construction steel sales reached 655.046 tonnes, down31.36 percent monthly and 18.1 percent year-on-year.
VSA expected that construction steel sales will struggle in July as therainy season is coming and many construction projects are delayed due tothe COVID-19 restrictions and losses because of higher steel prices.
The Vietnam Association of Construction Contractors emphasised that allconstruction contractors faced difficulties, there is no way to solve them asthe majority of private contractors used fixed price contracts, so they can'tbe changed, except for cases of force majeure.
Therefore, contractors have to deal with these problems by themselves, whilestate-funded projects must apply the material prices according to the noticesof the Department of Construction but these notices are not up-to-date.
Tran Bao Thach, Deputy Director of Hanoi Housing Investment and DevelopmentCorporation, said that as steel price accounts for 30 - 35 percent of aconstruction's value, and can be up to 40 percent in big projects, contractorshave suffered huge losses.
"For example, currently the market price of construction steel is 18,000 VNDper kg, while the price quoted by the Department in the first quarter is 13,250VND," Thach said.
"We lost nearly 5,000 VND per kg for a State public project. If theproject uses 100 tonnes of steel, then we lose approximately 500 millionVND."
"Many businesses are going bankrupt while small companies don't dareto attend bids or do anything."
"Most projects now are stagnant."
Similarly, contractors building the North-South expressway also feel the heatfrom the rising iron and steel prices.
Nguyen Minh Khiem, General Director of 319 Corporation, which is constructingthree key projects including Mai Son - National Highway 45, Cam Lo - La Son andMy Thuan - Can Tho, said that as it is a fixed price contact, it is verydifficult for the contractors as material costs keep rising.
Moreover, many provinces have not yet licensed enterprises to exploit land andwaste dump sites, as well as required payment for dumping, creating morechallenges.
"Now we are stuck between a rock and a hard place. If we don't work, theproject will be behind schedule, but if we continue, we will lose money,"Khiem said.
Meanwhile for private projects, if investors can't share the additionalexpenses from higher material prices, customers will be the ones to bear theburden.
"We can only wait for instructions from the Ministry of Construction tosee if there is any adjustments in steel prices," Thach added.
After the Ministry of Construction issued an official dispatch directingprovinces to report the situation of construction steel prices, recently, the VietnamAssociation of Construction Contractors sent an official letter to the Ministryof Construction proposing to adjust steel prices.
The association proposed that with the bidding package using State budget, theMinistry of Construction coordinated with the Ministry of Planning andInvestment and the Ministry of Finance to issue a circular guiding theadjustment of iron and steel prices.
In addition, the Department of Construction is assigned to coordinate with theDepartment of Finance of provinces to adjust prices each month during the timewhen iron and steel prices spike.
For bidding packages using other capital sources, it is recommended thatinvestors and contractors negotiate when there is a difference in pricedepending on contracts and construction volume./.
VNA
