As the real estate market in Vietnam has no positive signals, the consumption of construction steel is very slow. Steel sales have dramatically dropped since a year ago. However, cement consumption tended to rise in September over the same month in 2012.
According to the Domestic Market Regulation Division under the Ministry of Industry and Trade, the sluggish steel sale is attributed to the gloomy real estate market and unfavourable weather. According to statistics from the Industry and Trade Information Centre (VITIC), construction steel output reached 355,000 tonnes in September 2013, down 3 percent from the previous month and down 4 percent from the same period in 2012. Meanwhile, steel consumption dropped up to 5 percent over August and 6 percent over September 2012.
Mr Nguyen Tien Nghi, Vice Chairman of Vietnam Steel Association (VSA), said, the stockpiled steel volume increased because of real estate market slump and a series of stagnated construction projects. Compared with last year, steel sale and prices have dropped sharply. In the previous year, steel price sometimes peaked VND20 million per tonne and usually stayed at VND17-18 million but it plunged to only VND14-15 million in 2013. Despite falling prices, the purchasing power is showing no signs of increase. Currently, monthly steel sale is as low as 300,000 tonnes, compared with 400,000 tonnes in the normal time.
According to the Domestic Market Regulation Division, slow sale has caused steel inventory to pile up. The country’s steel inventory is now 316,000 tonnes, an increase of 12,000 tonnes over the same period in 2012.
Reduced sale has sent steelmakers to a dilemma. While being passive with production and business plans, they have to compete with the flooding of Chinese steel. For the time being, the domestic steel price is VND1 million higher than that of Chinese steel on every tonne sold. This has forced domestic steelmakers to downscale production or shut down mills. Worse, the recent rise in power prices also hit steel manufacturers.
Despite the gloomy picture of steel market in the first nine months of 2013, VSA remains optimistic about the 3- 5 percent rise in construction steel production output to approximately 5 million tonnes in 2013. This remark is based on the regular rise in steel demand at the end of the year.
However, unlike steel, cement consumption is growing up. Cement sale surged in the first four months of 2013 before easing until August. The sale climbed again in September. Thus, overall, the cement production and consumption in the first nine months of 2013 increased over the same period of 2012.
According VITIC, in the first month months of 2013, despite higher input costs caused by higher gasoline, electricity, coal, gas and oil prices, cement price was kept stable. Currently, cement price is VND1.3 -1.5 million per tonne in northern markets and VND1.6 - 1.8 million in southern markets.
The Vietnam Association of Construction Materials said it has proposed the Government to ask relevant organs and localities to use concrete to build roads in order to boost cement consumption. It also proposed the Government to address difficulties against construction material manufacturers by applying preference policies on tax, rescheduling debts and providing soft loans amongst others.
Mr Nguyen Huy Thang, Deputy General Director of Vinafacade Joint Stock Company and Deputy General Secretary of the Vietnam Glass Association, said that the State should give incentives to companies using industrial and agricultural wastes to make building materials. In addition, banks should also loosen conditions for loans used to upgrade technology for product quality enhancement and boost exports.
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