Vietnam: Following Government Interventions, Key Construction Material Experiences Price Drop
In a notable shift following two pivotal government meetings aimed at alleviating the challenges faced by the manufacturing and real estate sectors, steel prices, which constitute 15-20% of construction costs, have seen their first decrease after months of consecutive increases.
In March 2024, major Vietnamese steel manufacturers like Hoa Phat, Viet Duc, and Viet Y, among others, announced a reduction of 200,000 VND per ton in the price of rebar, bringing it down to around 14 million VND per ton. This adjustment marks the first decrease after a series of continuous hikes, spotlighting the impact of governmental efforts to stabilize the sector.
Steel, accounting for approximately 5% of the production value in the construction industry, plays a pivotal role not just in construction but across various sectors of the economy, influencing intermediary costs and the overall production value. The Vietnam Association of Construction Contractors (VACC) estimates that construction material costs generally make up 60-70% of total construction expenses, with steel alone constituting about 15-20% of the cost for apartment buildings and about 30% for terraced houses.
Recent developments have come on the heels of concerted actions by the Vietnamese government to address the real estate market's difficulties and the broader challenges in production and business. Two significant meetings were held: the first, chaired by Deputy Prime Minister Tran Hong Ha, focused on removing obstacles in real estate projects following the enactment of revised laws on Land, Real Estate Business, and Housing. The second meeting, led by Prime Minister Pham Minh Chinh, concentrated on policy implementation for monetary management in 2024, aiming to alleviate business hardships, spur growth, and stabilize the macroeconomy.
These government initiatives signal a robust commitment to resolving the persisting challenges in the real estate market and by extension, the steel industry, which has been grappling with high inventory levels, low sale prices, and additional financial burdens. The Vietnam Steel Association (VSA) anticipates fierce competition in sale prices among producers as they strive to expand and maintain market share in the initial months of the year.
This price reduction in steel may herald a period of recovery for the construction and real estate sectors, promising a potential uplift in the economy's prospects as it navigates through ongoing difficulties.
Source
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