Prices of Goods and Services Accelerate

On February 24 when oil traders raised retailing prices for the first time in 2010 with 17 percent applied to petrol and 24 percent to diesel oil, transport firms had to push up fares by at least 10 percent to offset fuel costs, according to the Vietnam Automobile Transportation Association (VATA). Along with other factors such as exchange rates, transport costs had to be raised by 15 percent on average in consideration of rising costs.

 

This hike started at the beginning of March.

So, many are wondering whether transport costs will be raised further after fuel prices were added VND2,000 - 2,800 per litre from March 29?

Mr Nguyen Manh Hung, President of the Vietnam Automobile Transportation Association (VATA), said: Previously when oil prices were still low, fuel made up only 45 percent or so of transport costs but the current proportion has exceeded 50 percent.

 

According to the association, when gasoline prices climbed another 10 percent, many transport firms considered new price-raising plans. This signalled that transport fares would be higher in many companies in the upcoming time. However, the additional cost should be carefully taken into account and acceptable to customers.

“The rate of return of transport companies is currently fairly low, only about 10 percent. Thus, if the price is not hiked, they will not be able to reinvest for operating expansion,” said Hung.

 

However, the VATA also recommended transport firms to reduce costs and reorganise operations to enhance performance efficiency.

 

Mr Nguyen Tien Nghi, Vice Chairman of the Vietnam Steel Association (VSA), said: Making a tonne of steel from ingot requires about 40 kilos of fuel oil. According to the latest price hike adopted by the Ministry of Finance where fuel oil price was raised from VND14,800 to VND16,800, fuel costs for a tonne of steel will be hiked to VND80,000, let alone other costs such as transport fares inter alia which also need to be increased.

 

So, according to Mr Nghi, steelmakers will also have to push up selling prices.

 

“However, the degree of addition also has to depend on ingot and scrap prices in the world - the primary inputs of metallurgy. In addition, the purchasing power of the market in the near future is also a decisive factor in the price rise of this commodity,” said Mr Nghi.

 

Mr Nguyen Van Diep, Chief of the Office of the Vietnam Cement Association, said: After steel prices added VND60,000 per tonne in early February 2011, most cement producers did not make any official move. Cement is now being sold at from VND900,000 to VND1.36 million per tonne, depending on type and region. But after petroleum prices were raised twice at very high rates, the selling price of this construction material must be higher.

 

In addition, coal miners have informed to raise prices of coal dust graded 3c and 4a sold to cement producers by VND500,000 to VND1.8 million to VND1.9 million per tonne.

 

"While electric and gasoline costs account for 40-50 percent of production costs of cement plants, cement producers must surely increase selling prices from April,” said Mr Diep.

 

According to the Hanoi Supermarket Association, supermarkets in the capital city have been informed of price hikes from many suppliers since late February and early March. The increase is applied to most products, from garments and food to home appliances, ranging from 3 percent to 15 percent.

 

Mr Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, said: The recent strong hike in gasoline prices will cause production and transportation costs at many businesses to go up; therefore, output prices will definitely increase.

 

However, selling prices at supermarkets are usually revised later than on free markets. Mr Phu predicted that new prices at supermarkets will be applied from April 10-15.

 

He also recommended that market authorities should strengthen price inspections to prevent unreasonable price hikes.