Stagnated construction leads to large steel inventories
Posted on 15 September 2020
The COVID-19 pandemic has led to many construction and real estate projects being delayed, resulting in large inventories of construction materials, especially steel.
The Việt Nam Steel Association (VSA) said the steel industry had recorded negative growth in domestic production and consumption since the beginning of the year.
The Việt Nam Steel Corporation (VNSteel) announced that its consolidated profit after tax had decreased by about 80 per cent compared to the same period last year.
Many other companies have also reported falling revenue.
Trần Tuấn Dương, Hòa Phát's general director, said that due to the influence of COVID-19, the company's production activities had only started to recover in June.
"Our production was almost completely stagnant in the first quarter of this year. Although sales volume increased slightly, in general revenue decreased by about 10 per cent," said Dương to the Kinh Tế and Đô Thị (Economy and Urban Affairs) newspaper.
Vice Chairman of the Việt Nam Urban Planning and Development Association and architect Hoàng Quang Huy said that the value of building materials usually accounted for 60-70 per cent of the cost of construction works.
The pandemic had caused delays to construction activities, which had a negative impact on the production of building materials, said Huy.
However, the construction steel market is forecast to flourish for the remainder of the year.
Trịnh Khôi Nguyên, the VSA's vice chairman, said in the short term the domestic market would have more demand for steel after social distancing ended.
Domestic production and sales of construction steel would be less difficult, he added.
The VSA's report said that construction steel production in the past eight months reached more than 6.6 million tonnes, down 6.9 per cent over the same period last year.
Sales of construction steel products reached nearly 6.7 million tonnes, down 5.8 per cent over the same period last year; of which, exports accounted for 906,962 tonnes, down 5.9 per cent.
Steel inventories stand at more than 604,000 tonnes. The second wave of COVID-19 at the end of July hindered the recovery of production and business activities, negatively affecting the entire economy.
In order to revive the manufacturing industries, the Government had been fighting the pandemic and developing the economy by speeding up investment capital made from the State budget in August and first eight months of the year by 45.4 per cent and 30.4 per cent over the same period last year. This was the highest growth from 2016-2020, the VSA said.
As a result, steel production of all kinds reached more than 2.3 million tonnes in August, up 11.36 per cent over the previous month.
Sales of steel of all kinds reached 2.1 million tonnes, up 5.88 per cent compared to July. Steel exports of all kinds reached 462,138 tonnes, up 8.81 per cent over the previous month.
Prices of raw materials for steel production fluctuated in August, continuing an uptrend from the end of July.
Currently, domestic steel selling prices are averaging about VNĐ11,000 (US$0.5) -11,050 per kilogramme depending on the type of products and enterprises.
The VSA said that businesses were facing fierce competition to maintain or develop their market shares in both the construction and civil sectors.
Therefore, domestic construction steel prices had not been adjusted much despite rising raw material prices, said the VSA.Source : Vietnam News