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Crisis hits building materials industry
Despite preparatory measures to deal with the economic downturn, the construction materials market has been hit harder than expected, industry insiders say.
Manufacturers are struggling to improve the situation as the rainy season approaches, but the situation is further compounded by the impending increase in steel prices alongside rising prices of steel ingots in the global market.
Sales of construction steel, cement and bricks have been hit hardest despite a lot of promotion and discount campaigns.
Thep Viet Company Inc, a steel maker, has failed to increase sales although it reduced prices seven times over the past four months.
“Our sales have dropped by 30 percent over the same period last year and more than 200,000 tonnes of steel are now stuck in store,” said Do Duy Thai, the company’s CEO.
Manufacturers say the severe shortage of large-scale construction projects is the main cause of the drastic fall in demand. This has brought consumption at large construction sites down by 60 percent.
Cement manufacturers are not much better off than the steel markers. They are also reporting 25-30 percent drop in sales over the last year.
Manufacturers of decorative bricks and clay are faring no better than their steel and cement counterparts.
Their price-reducing strategies have also failed to boost sales.
“Reducing prices can’t solve the problem because the real cause is the falling demand. Although we’ve reduced our price by 15 percent, our current sales are at 30 percent of our production capacity,” said Hoang Quoc Tuan, Deputy General Director of the Dong Nai Brick Company Ltd.
Like real estate developers, the construction materials industry is viewing the low-income segment as the light at the end of their recessionary tunnel.
Individuals repairing or building new houses are consumers with the highest market potential as their numbers are growing quickly, particularly with building costs falling by about 25 percent to around 2.2-2.4 million VND (122-133 USD) per sq.m as a result of falling prices of construction materials.
According to Ho Chi Minh City’s Tan Phu District Urban Management Department, 1,100 people have submitted applications for construction approval from the local authority within the first three months of this year.
“The number of people who want to repair or build new private houses is quite high and stable. The situation is much better than the same period last year when construction materials were too costly for individual users,” says Bui Hoang Trieu, Director of the Ho Chi Minh City-based Minh Khoa Ltd., a construction company.
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