A “Double danger” makes construction contractors standstill in the third Quarter of 2021

June 15, 2021October 15, 2021

What caused the majority of construction contractors and investors to fall into disrepair in the third quarter of 2021? The escalating prices of iron and steel, materials, and complicated developments of the epidemic have been and continue to affect the construction industry in general and the field of the factory and industrial buildings in particular. The question is for us now, where will the reasonable way out for construction units and investors to overcome this difficult “double danger”?

The rapid increase in the price of iron and steel materials has made the construction industry market in general and the field of factory and industrial construction in particular “wobble”.

In fact, the situation of iron and steel prices has fluctuated tremendously since October 2020 and until now, 2021 has not shown any signs of cooling down. The price of the steel industry exploded, bringing a lot of concerns and worries directly to construction contractors, investors, and especially factory construction units.

However, in the opinion of Bank of America experts, this increase in steel stock prices can only happen in a short time, suitable to call it a “bubble state”. The steel price has risen to a record high compared to the average level during the past 20 years, which is enough reason for the stock price of the steel industry to follow the trend of “touching the ceiling”, which will certainly bring more difficulties in the future. future for the construction industry.

*Steel stock prices in the US are continuing to increase strongly in the next months of 2021 (Source: Refinitiv.)*

The price of iron and steel has increased for a long time, the object of direct influence is construction contractors, especially contractors in the field of factories and industrial buildings. Not only stopping there, but the continuous increase of iron and steel prices also led to the influence of construction material prices. This makes it even more difficult to measure, estimate the volume of materials to give the most appropriate bid. Particularly for investment units, looking at the price of building materials with no signs of decline, the decision to invest in construction at this time is probably an unwise move, affecting the initial budget out. So according to the right psychology, the construction investment at this time, there is only “single loss, double loss”.

*The rapid increase in prices of iron and steel materials has made the construction market in general and the construction of factories and industrial houses in particular “wobble”*

In parallel with the rapid increase in the price of iron and steel and construction materials, the epidemic situation is also becoming more and more stressful in Vietnam.

Vietnam is facing an epidemic that is raging again, and vaccines are scarce, which we still cannot guarantee to meet the full dose for the whole country. New outbreaks are also forming very quickly and are concentrated in our country’s North and South regions. It is more difficult to control when the appearance of many disease strains is always a very dangerous threat. The most dangerous are industrial parks, where a large number of workers hide a lot of anxiety. Another problem was raised, how to ensure the productivity of industries and maintain the economy, but still well implement the State’s distancing regulations in the fight against the epidemic.

*The epidemic situation is becoming more and more stressful in Vietnam, greatly affecting people’s lives and the stability of the country’s economy*

We have seen how difficult it was in the first 3 waves of the epidemic in Vietnam, greatly affecting many industries, including the construction sector. Now it will be even more difficult because investors are no longer “salty” in participating in the Vietnamese market when the epidemic situation rages. A series of questions arise: How can developers compete in a perfect way to get a project during the pandemic? How to get enough manpower? How to ensure the progress of ongoing projects?. “The investor takes care of 1, the contractor takes care of 10”, because, besides the concern about the escalating price of construction materials, there is still pressure on human resources and the requirement to complete the schedule during the requesting extension period. this social way.

The complicated epidemic situation brings many difficulties to construction units. Le Gia Phuc is no exception. However, the inspection work at the construction site was still fully conducted and did not forget to take the 5K message very seriously

Vietnamese construction contractors have been facing many changes

There is an opinion that the increase in steel and material prices, stemming from the demand for too much use, requires the source of production materials to always be in a state of non-stop production, leading to higher prices. compared to the end of the previous year. That is one of the many reasons that we explain the problem of this rapidly increasing iron and steel price. And when the price of steel in particular and the price of materials, in general, continue to escalate for a long time, the contractors will fall into a dire situation, worse, the risk of collapse from the Vietnamese construction market is very likely.

The construction units of factories, industrial buildings, iron, and steel occupy a significant position, determining the stability of a project. According to statistics, this number has reached 25 – 30% of total materials at the construction site, and when the actual steel price has increased about 2 times compared to the same period last year, try to do a rough calculation. Contractors have suffered a loss of about 15-20% compared to the winning bid price of the project, sometimes even more.

*The importance of iron and steel materials in the construction industry in general and the construction of factories and industrial buildings in particular*

Things continue in this direction, if the contractor quotes the investors, a “shake of the head” is very easy to receive. And then the consequences will be the same as many other times, price competition continues to be the subject of discussion among contractors. Since then, the lack of transparency, the quality is not guaranteed, causing distrust for investors.

The losers here are none other than construction contractors. For units that refuse to change their mindset and accept to continue following the traditional style, it is entirely possible to create difficulties for themselves. Not stopping there, the epidemic situation once again returned in Vietnam, predicting that the construction market will face many fluctuations. Projects that are being deployed simultaneously give a pause signal, human resources are not guaranteed, leading to progress results that do not go as planned.

*Contractors are having to fight with the real “Double Danger”, which is the escalating steel price situation – and a combination of complicated epidemics occurring throughout the country.*

For the construction industry, the high price of construction materials, combined with the outbreak of the epidemic, has created great pressure on contractors. “Double danger” in construction is quite possible shortly, promising fierce competition for contractors. More specifically, Vietnam’s construction industry is facing the risk of losing growth as of the end of 2021.