Vietnamese Contractors Struggle due to Higher Steel Prices
VNA reported that although steel rebar prices have dropped, they are still at high rates, up 1.7 times compared to the end of 2020, causing construction contractors to suffer. The Vietnam Association of Construction Contractors emphasised that all construction contractors faced difficulties, there is no way to solve them as the majority of private contractors used fixed price contracts, so they can't be changed, except for cases of force majeure. After the Ministry of Construction issued an official dispatch directing provinces to report the situation of construction steel prices, recently, the Vietnam Association of Construction Contractors sent an official letter to the Ministry of Construction proposing to adjust steel prices. The association proposed that with the bidding package using State budget, the Ministry of Construction coordinated with the Ministry of Planning and Investment and the Ministry of Finance to issue a circular guiding the adjustment of iron and steel prices. In addition, the Department of Construction is assigned to coordinate with the Department of Finance of provinces to adjust prices each month during the time when iron and steel prices spike. For bidding packages using other capital sources, it is recommended that investors and contractors negotiate when there is a difference in price depending on contracts and construction volume.
Hanoi Housing Investment and Development Corporation Deputy Director Mr Tran Bao Thach said that as steel price accounts for 30-35% of a construction's value, contractors have suffered huge losses. He said "For example, currently the market price of construction steel is 18,000 VND per kg, while the price quoted by the Department in the first quarter is 13,250 VND. We lost nearly 5,000 VND per kg for a state public project. If the project uses 100 tonnes of steel, then we lose approximately 500 million VND. Many businesses are going bankrupt while small companies don't dare to attend bids or do anything. Most projects now are stagnant."
319 Corporation, which is constructing three key highway projects including Mai Son National Highway 45, Cam Lo La Son and My Thuan Can Tho, General Director Mr Nguyen Minh Khiem said that As it is a fixed price contact, it is very difficult for the contractors as material costs keep rising. Now we are stuck between a rock and a hard place. If we don't work, the project will be behind schedule, but if we continue, we will lose money. We can only wait for instructions from the Ministry of Construction to see if there is any adjustments in steel prices.”