Workers at a construction site of the second Vinh Tuy Bridge (Photo: VNA)After hovering around 18,000 - 19,000 VND a kilo (0.77 - 0.81 USD per kilo),the price of construction steel has cooled down to the same levels as lastyear.
On July 9, steel producers, including Hoa Phat Group, Vietnam – Italy Steel andVietnam Germany Steel Pipe, reduced steel prices for the eighth time in a rowin two months.
Accordingly, the price of coils and rebars declined to 16,000 - 16,500 VND perkilo, about 8-9% lower than that in early May and down 13-15% compared to thebeginning of March.
Vietnam Steel Association (VSA) said that the recent downtrend was thanks tothe continuous decrease in raw material prices since the end of March, causingthe market to slow down. Distributors seek to reduce inventories, so thefactories’ outputs are much lower than usual.
SSI Securities Corporation said that after advancing 15% in the first quarterdue to pent-up demand, domestic steel consumption volume, includingconstruction steel, galvanised sheet and steel pipe, dropped by about 32%on-year in April and May.
Weaker demand due to persistent high steel prices and rising costs of otherconstruction materials stalled operations, while concerns over record steelprices caused distributors to pause stockpiling and tightened managementpolicies on capital inflows into the real estate sector.
VNDirect Securities Corporation expects the selling price of construction steelwill gradually go down to the average level in the long term.
However, the prospect of a strong recovery in steel demand after the pandemicand high input material prices will make the sliding process longer thanexpected. Specifically, the average selling price of construction steel in 2022and 2023 will be 16,100 VND and 14,500 VND a kg, respectively, down 5-15%compared to the current price.
Construction businesses benefit significantly from the steel price movements.In the structure of construction costs, raw materials account for 65-70% of theestimated construction expenses, of which steel and cement are the two mostimportant materials.
However, the prices of cement still inch higher to 1.65 - 1.7 million VND atonne due to higher costs of input materials such as coal, electricity,gasoline, gypsum, additives, packaging, freight rates and labour.
According to the Vietnam National Cement Association (VNCA), the prices ofcement will continue to rise in the second half of the year as input costs arestill at high levels and domestic consumption can increase again thanks to theacceleration in disbursing public investment and implementation of keytransport infrastructure projects.
Positive outlook for construction stocks
The Ministry of Planning and Investment said that public investmentdisbursement in the first half of the year was estimated at 151 billion VND,fulfilling nearly 28% of the plan assigned by the Prime Minister.
Besides factors related to policies, institutions, or labour shortages, thehigh price of construction materials is also the cause of the slow disbursementof public investment.
Prime Minister Pham Minh Chinh signed Decision No. 548/QD-TTg on establishingsix inspection teams to solve problems related to the disbursement of publicinvestment capital.
Specifically, the Government will implement many drastic solutions to boostpublic investment in the second half of the year and next year, such asincreasing the frequency of updating material prices in localities and keepingproject diaries to ensure payment for contractors.
For the whole year, VNDirect maintains its expectation that the publicinvestment will increase by 20-30% over last year, as growth in the second halfof 2022 will be higher than in the first half.
At the same time, as Vietnam is still gradually reopening its economypost-pandemic, public investment disbursement will grow rapidly throughout 2023and become the main driver of demand for construction and constructionmaterials.
In the long term, the scale of investment packages in key traffic projects inthe country is very large, up to 32.1 billion USD in the 2022-2030 period.
Mirea Asset Vietnam Securities assesses that the profit margin of theconstruction industry is under pressure due to the high cost of input materialsand the dip in the supply in the housing market. In addition, the impact ofpublic investment has not met expectations.
However, in the long term, Mirea has a positive expectation on the growth ofconstruction stocks as the demand for investment in infrastructure andresidential real estate in Vietnam is still high. As the progress of publicinvestment has improved and the bottlenecks of the real estate market will beremoved, there is more room for construction companies to grow./.
VNA
