Posted on 18 Aug 2008
A modified motorbike delivers steel materials to a
construction site in
Steel and cement prices have plummeted in the last two weeks
but, with demand becoming sluggish, manufacturers are struggling to sell their
products.
Nguyen Quoc Dai, director of a private construction business
in Ho Chi Minh City’s District 7, said steel prices have fallen by VND2
million- 2.5 million per ton since the beginning of July to VND18.2
million-18.5 million (US$1,096-1,114).
“You can buy as many tons as you want and the producers will
make free delivery,” Dai said.
The Vietnam Steel Corporation, whose prices are already
VND500,000 a ton lower than private and joint venture manufacturers, is
offering a further cut of VND300,000- 340,000 for big buyers.
In the early part of this year prices had doubled, and
home-builders and building contractors faced a hard time.
A sales executive at a HCMC steel joint stock company, who
wished to be unnamed, said the situation has changed now with consumption of
building materials falling sharply in the rainy season.
“Constant rains hinder construction and also delay new
projects.” Steel demand is even weaker in the north and the average price there
now stands at VND17.5 million a ton, Nguyen Tien Nghi, vice president of the
Vietnam Steel Association (VSA) said.
VSA figures show that its members sold 250,000 tons in July,
16.5 percent down from June.
Steel feedstock prices have also fallen.
Billet imported from
Cement down too
The cement market has also started to cool down, with August
consumption in HCMC falling by 60 percent month-on-month.
Mai Anh Tai, deputy director of Ha Tien 1 Cement Joint Stock
Company, said producers and distributors have failed to achieve their sales
targets.
Huynh Anh, a building-materials retailer in District 7, said
sales have plunged despite falling prices.
Retailers make a mere VND500 profit from a 50-kilogram bag
of cement they sell for VND65,000- 69,000, Anh said.
Steel and cement producers are also offering special
discounts to regular customers.
A sales executive at a cement joint venture, who wished to
remain unnamed, said several large wholesalers are getting discounts of
VND5,000-10,000 a ton.
Their steel counterparts get discounts of VND30,000-100,000.
But this is not enough to increase offtake.
A steel wholesaler, speaking on the condition of anonymity,
said the discount is attractive but he does not plan to buy much because he
already has a large inventory bought when prices were up to VND20.5 million
($1,200) a ton.
The wholesaler is, in fact, hoping to liquidate the stocks
quickly to repay bank loans.
Prices are likely to fall further if demand remains low.
Analysts said retailers could also hope to enjoy discounts,
with consumers getting steel at not much higher than wholesale prices.
Cement producers said, on the other hand, they can hardly
cut prices further because they still have to import clinker at high prices.
Retailers would have to offer competitive prices, lowering
their margins, to achieve high sales, analysts said.
