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Steel, cement sales slow despite drop in prices
The building materials market in Ho Chi Minh City has cooled recently, with both consumption and prices of steel and cement slowing.
In Ho Chi Minh City, retail steel prices have fallen by VND500-600 a kilogram since early last month to VND16,100-17,000 per kilogram. Steel prices have dropped by more than 30 percent over the past two months.
A retailer in HCMC’s District 11 said she received a large order of steel about two months ago. As prices fell over the past month she lost VND5 million-7 million a ton for the steel in her storage facilities.
Many retailers in the city said steel demand had plummeted recently, an unusual occurrence as the pace of construction usually picks up as the calendar year winds down and the Lunar New Year approaches.
The Vietnam Steel Association (VSA) said domestic steel consumption last month was about 110,000 tons, the lowest level this year.
With many construction projects halted or delayed, demand for steel has decreased and prices have fallen, Pham Chi Cuong, VSA Chairman, explained.
Last month, VSA predicted steel consumption in Vietnam may drop this year after the government asked state-owned companies to halt construction projects that were not crucial.
Cuong said he expected investors to try to complete projects towards the end of the year, which would give steel consumption a boost. But he also said he could not say for sure how much steel demand will increase in the upcoming months.
Many retailers, however, said an increase in steel sales was unlikely because consumers may wait for prices to fall further.
More than 400,000 tons of finished steel and 500,000 tons of billets are currently stored in warehouses around the country, waiting to be sold, Vietnam News Agency reported, citing the VSA.
Last month, the Ministry of Finance halved the 20 percent export tax on iron and steel to help local producers overcome domestic market stagnation.
The country last year consumed 10.2 million tons of steel, an increase of three million tons from a year earlier, Bloomberg quoted VSA General Secretary Dinh Huy Tam as saying.
Low cement consumption
A director of a southern cement company, who wished to remain anonymous, said sales in the last two months had been low, only half of May’s figure.
Mai Anh Tai, deputy director of Ha Tien 1 Cement Joint Stock Company, said his company had experienced a 20-25 percent drop in consumption since May.
The average retail price of a 50 kilogram bag of cement in HCMC is VND68,000-72,000 (US$4.12-4.36), which is VND10,000-15,000 lower than in May.
But cement manufacturers said they will lower their prices even more to stimulate demand. Some said they will offer up to a VND3,000-4,000 discount to wholesalers to try to reduce retail prices.
“Other cement companies will also have to offer special prices to boost consumption,” Tai said. “Our company will have to try hard to meet the sales target set earlier this year.”
Ha Tien 1 has a 30 percent market share in HCMC and the southeast provinces, where 8.6 million tons of cement are expected to be sold this year, the Saigon Economic Times reported.
The Ministry of Construction predicted Vietnam will use 40-41 million tons of cement in 2008, a 14 percent increase on last year, Vietnam News Agency reported earlier this year.
Thanhnien
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