According to data from the General Statistics Office, the building materials market is among the sectors most impacted by the Covid-19 epidemic with the rate of businesses affected at 86.1%. In addition, the resurgence of the Covid-19 pandemic from May 2021 also caused many projects to be delayed, affecting the disbursement of the Government’s investment for new construction and installation items.
News for the Government’s investment in Q2/2021
Data from the General Statistics Office showed that the disbursement of the Government’s investment in the first 6 months of 2021 was estimated at 171,900 billion VND, up 10.2% over the same period in 2020, but only reached 36.8% of the annual plan.
In the context of the complicated situation of the pandemic in many cities, Government’s investment is now a great hope to minimize difficulties for businesses. In addition, promoting Government’s investment to help increase connectivity between regions, connecting Vietnam with the world is a factor attracting FDI in the future. According to the forecast of the General Statistics Office, in the period of 2021 – 2025, if the disbursement of the Government’s investment capital increases by 1% each year compared to the previous year, GDP will increase by 0.058%.
Besides the direct impact, the spillover effect is stronger than the previous period. For every 1 unit of the Government’s investment capital disbursed, there will be 1.61 units of non-state investment capital (including the private sector and FDI sector), which is higher than 1.42 units in the previous period. The Government’s investment disbursement plan for the 2021 – 2025 period, which was announced 2,500,000 billion VND in the earlier 2021, was raised to 2,870,000 billion VND on May 24. That was an increase of more than 40% compared with the implementation of the previous 5-year period.
Supply-demand balance of some major building materials
The supply of bricks, tiles, and paving stones have many fluctuations
For baked bricks:
Vietnam has nearly 4,000 production businesses with a total designed capacity of 26,874 billion bricks/year. In the first 6 months of 2021, the production of baked clay bricks will reach 8,200 billion; down 9% over the same period in 2020.
For adobe bricks:
The number of concrete brick production businesses in Vietnam is about over 2,500 lines with a total design capacity of about 12.6 billion QTC bricks/year. Production of adobe bricks in the first 6 months of 2021 reached 804 million; down 21.6% over the same period in 2020.
For baked tiles:
Production output of bricks and tiles had a higher growth rate in the second quarter than in the first quarter. The reason is that the expectations of Vietnam’s civil construction industry will gradually increase towards the end of the year. However, in the long term, the trend of production and use is towards adobe materials. Limiting the production and use of baked bricks made from clay is a major policy in order to rationally use resources, protect the environment and fulfill the Government’s international commitments.
For ceramic tiles:
Number of domestic building materials businesses in producing ceramic tiles sectors is more than 90 with a total design capacity of 821.6 million m2/year. The ceramic tile enterprises are capable of producing various types of tile products such as ceramic tiles, granite tiles, cotto tiles, and large-sized mosaic tiles. In the first 6 months of 2021, the production of ceramic tiles reached 227.41 million m2; a 10% decrease compared to the same period in 2020.
Cement supply grows strongly to meet domestic demand
In 6M/2021, the total consumption of cement and clinker in Vietnam is estimated up 16.62% over the same period in 2020. Of which, consumption in the domestic market was about accounting for 62%, increasing by 11.05% over the same period.
In terms of geographical area, the Southeast is still a key region of cement and clinker consumption, accounting for 25% of total domestic consumption. Followed by the Red River Delta (12%) and Northeast (12%). These are all areas with high urbanization rates, using large amount of building materials investment in housing projects, as well as physical infrastructure, has not shown any signs of cooling down.
Due to high demand for cement use and export, cement production in 6M/2021 continues to grow at a high rate compared to the same period in 2020. It is estimated that production output in 6M reached a growth of 8.3%.
Steel production and consumption recorded significant growth
For construction steel:
Construction steel production capacity in the first half of 2021 increases rapidly. The current capacity is about 14 million tons. In the first 5 months of the year, construction steel production increased by 12.87% while consumption also increased by 14% over the same period in 2020.
For steel pipes:
Steel pipe production and consumption increased strongly in the first 5 months of 2021. Accordingly, production grew by 28.75% while consumption increased by 23.15%.
The proportion of domestic consumption still accounts for the majority because low-value products are not favorable for export activities. The steel pipe market is relatively concentrated, in the hands of two giants Hoa Phat and Hoa Sen.
For KL & SPM coated steel sheet:
Production and consumption of coated steel sheet KL & SPM in the first 5 months of 2021 grew at 49.35% and 45.22% respectively over the same period in 2020. In addition to boosting exports, businesses also actively expand domestic markets.
The domestic market share of galvanized steel has little fluctuation in 2021. The concentration of the market mainly lies in two large enterprises, Hoa Sen and Ton Dong A.
Prices of some building materials on the market
Not many fluctuations in the price of cement in Northern, Central, and Southern Vietnam
The price of cement is likely to remain stable because cement products have no difference along with its high industry competition level. However, the current cement price is still different by region. In the South, cement price is at a relatively high level. This is also a region with a lack of supply when there are only 8 cement factories here with a capacity of 11.9 million tons while its demand is up to more than 23.61 million tons.
Domestic steel price continues to escalate
In May 2021, the average construction steel price reached 17,000 – 17,500 thousand VND/kg, which is the highest level since 2019. This escalation is still a result of the increase in input material prices and the upward trend of world steel prices. In addition, the rush to deploy construction works and increase the purchase of iron and steel products before the return of the Covid-19 pandemic in June also led to an increase in steel prices.