The national economy will gradually recover in 2010, resulting in a slight increase in the prices of construction materials such as steel and cement.

It is predicted that construction materials will experience minor fluctuations in prices due to soaring input costs on the world market.

Fierce competition between locally-made and imported steel

However, the price of locally-made steel will not increase sharply because it has to compete against imported steel. In January 2010, the price of steel of the Vietnam Steel Corporation rose by VND90,000-120,000/tonne compared to the previous month. This was attributed to an increase in input costs, fluctuations in foreign currency exchange rates and high demand.

Recently, the wholesale price of steel ranged from VND11.7-11.74 million/tonne in the northern region, while the price was higher in the south, VND11.52-12.12 million/tonne. The retail price in the north ranged from VND2.8-13.2 million/tonne, while steel retailed in the south for VND12.3-13.4 million/tonne.

According to the Vietnam Steel Association (VSA), the steel sector will face numerous difficulties in 2010 due to an increase in input prices for iron ore, coal, oil, steel ingots and electricity. However, steel prices on the domestic market will remain stable as locally-made steel is facing tough competition from imported steel.

VSA Chairman Pham Chi Cuong says that there will be no strong increase in steel prices as the country is not short of steel. Moreover, the price of imported steel from China, Russia and other Southeast Asian countries is currently lower than the price of Vietnam-made steel.

He points out that in 2010 after a number of new projects on steel production get off the ground, there will be an abundant supply of steel on the domestic market, and supply will probably exceed demand. As a result, locally-made steel will have to increase its competitive edge to maintain its share of the home market.

The VSA has proposed that the Government introduce measures to adjust the exchange rate and provide incentive policies in order to meet the increasing demand of steel businesses for investment and foreign currency. The Association also called for proper implementation of the regulations of the World Trade Organisation (WTO) to help local businesses with protective measures against the strong penetration of imported products into Vietnam that may threaten the employment of Vietnamese workers.

In addition, the VSA has stressed the need to strictly manage newly-invested projects to create balance between steel supply and demand on the domestic market.

Cement producers in the face of supply exceeding demand

As the Government’s stimulus measure to allow 10 percent in VAT will expire by the end of this year, companies and joint ventures under the Vietnam Steel Corporation will increase in January 2010 by VND25,000-41,000/tonne, up 2.5-4.8 percent over the previous month.

At present, cement trades at VND858,000-1,120,000/tonne, including VAT. In the north, the cement price stands at VND890,000-1,120,000/tonne, while in the south the figure is higher at VND1,100,000-1,400,000/tonne.

According to the Ministry of Construction, total demand for cement in the domestic market this year will reach 50-51 million tonnes, up about 13 percent over last year. It is predicted that supply will exceed demand by 5 million tonnes.

The Ministry has asked the municipal and provincial People’s Committees to stop approving new cement production projects. It also requested the Vietnam Cement Corporation and their cement producers to seek export markets to balance supply and demand.

Cement production and consumption deceased sharply in the first quarter of last year, but increased in the second and fourth quarters thanks to the Government’s stimulus package which reduced the VAT by 50 percent.

In short, the price of cement should remain stable on the domestic market, perhaps seeing a slight increase of VND10,000-40,000/tonne despite a possible increase in input costs, including coal, oil and electricity expenses.

(Source: VOV)