Projects forced to halt construction as building material prices soar

 

Hanoi (VNS/VNA) - The fourth wave of COVID-19 cases, coupled with the recent rise in prices of building materials, has forced many projects to halt construction or even fall into stagnation, which would affect the disbursement of public investment this year. 

From the beginning of this year, steel prices jumped by 40 percent, significantly pushing up investment capital, in some cases by billions of Vietnamese dong for each project.

This put construction enterprises into difficulties. Some have been forced to halt construction to avoid further losses.

A representative from a contractor working on the Cam Lam – Vinh Hao expressway project said that the increase in steel price pushed up the project’s investment capital by around 150 billion VND.

Although there was always a risk of market price fluctuations, an unanticipated huge increase meant unforeseen financial problems.  

Halting construction would affect the progress of the projects, especially public-investment projects, a constructor said, adding that solutions must be found early as public investment was considered an important growth factor during the pandemic.

Other component projects like the North-South Expressway projects also faced the same issues.

Nguyen Minh Khiem, general director of 319 Corporation which was building the Mai Son – National Highway 45, Cam Lo - La Son and My Thuan – Can Tho, said that skyrocketing building material prices put contractors into difficulty and created the risk that projects would fail to follow their planned schedules.

According to the General Statistics Office (GSO), the price index of steel and iron product increased by nearly 20 percent in April over the same period last year and more than 23 percent in the first four months of 2021.

GSO pointed out three reasons for the increase, including rise in prices of raw materials for steel production and transportation costs, decrease of global steel supplies as China tightened control over production volume, together with rising domestic demand.

Recently, the Association of Small and Medium – Sized Enterprises of Nam Dinh province sent a document to the provincial People’s Committee and the Vietnam Chamber of Commerce and Industry to ask for extension of deadline for construction contracts or temporary halt of construction to wait for prices to fall.

Tran Xuan Ngu, the association’s President, said that for civil and infrastructure construction projects with total investment of 10 billion VND or less, the increase in building material prices pushed up investment capital by around 600-700 million VND.

Ngu said that building materials accounted for around 60 percent of the construction project’s budget.

Nguyen Quoc Hiep, President of the Vietnam Association of Construction Contractors, said many companies were struggling and stuck between a rock and a hard place.

The Ministry of Transport has asked investors of traffic infrastructure projects to promote solutions to minimise the negative impacts of the steel prices fluctuations.

The Ministry of Construction also asked relevant agencies and provincial people’s committees to evaluate the impacts of the COVID-19 pandemic and building material prices fluctuations on public-investment projects.

Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, said that not only steel but also other building materials saw significant increases in prices, which pushed up investment capital and forced many projects to fall into stagnation.

When the investment capital increased, the investors must ask for adjustments and this process might take several months, even years, Cung said, adding that if no drastic measures were raised, the disbursement of public investment might be low this year./.