Contractors and people are struggling in the 'storm' of construction material prices.

Steel prices have been continuously fluctuating and increasing recently. (Photo taken at a steel supply facility in Do Luong district). Photo: Van Truong

Present at the construction site upgrading Lach Quen Fishing Port, Quynh Thuan Commune, DistrictQuynh Luuquite deserted. A representative of a construction contractor said: This package costs over 20 billion VND, the contract was signed in February 2022, but the high price of construction materials is making construction difficult. At the beginning of the year, round steel type D6-8 Tisco cost 13 million VND/ton, but by this time it has increased to 19 million VND/ton. The cost of iron, steel and cement materials alone has had to compensate for the loss of over 1 billion VND for this project.

Steel suppliers require contractors to pay a deposit immediately before finalizing the price because they cannot know when steel factories will increase prices in the near future.

At this time, Dien Chau district is implementing the construction of Dien Kim bridge worth 125 billion VND and is also facing difficulties and having to compensate for losses in construction due to high steel prices. This is a permanent reinforced concrete bridge, located on the main route to the coastal area of ​​Dien Chau district.

Thanh Nam Bridge (Con Cuong) construction project is facing difficulties due to high steel prices. Photo: Van Truong

During this period, the construction unit is facing a very difficult "storm" of construction material prices. The representative of the construction unit said: This project started construction in December 2021, then from the beginning of 2022 until nowIron and steel prices continue to increase, just counting the increase in steel prices, the contractor has lost more than 6 billion VND. Knowing that continuing to do it will mean losing money, but not doing it will mean being fined for breach of contract.

According to Mr. Nguyen Van Dong, a contractor in Yen Thanh district, the cost of construction materials often accounts for 40 - 70% of the total project estimate. The price increase of 5 main materials, namely cement, construction steel, stone, sand and brick, has increased construction costs by 1.25 - 1.4 times, causing all construction projects to suffer losses if there is no adjustment of construction material prices and labor unit prices close to actual prices.

Some projects in Yen Thanh have been delayed due to high construction material prices. Photo: Van Truong

The high price of materials is not only making it difficult for construction companies but also for people. Mr. Tran Van Tam in Dien Dong commune, Dien Chau district, who is currently in the process of building the foundation for his house, shared: Construction costs have increased quite a bit. Compared to the beginning of the year, sand has increased by more than 10,000 VND/cubic meter; various types of tiles have increased by 5,000 VND/m2, construction bricks have increased from 2,600 VND/piece to 3,700 VND/piece; cement prices have also been adjusted to increase by 30,000 - 40,000 VND/ton... The estimated cost of building a house is 1 billion VND, but now it has increased to 1.3 billion VND.

Currently, many families have plans to build houses, but due to the high price of construction materials, they have to postpone the construction until prices stabilize.

Through research, it is known that while the prices of raw materials such as steel, cement, sand, gravel, labor, machinery, etc. have increased significantly, most contracts signed with investors are in the form of a lump sum or a fixed price from the beginning, so contractors not only reduce profits but also face the risk of losses.

This has led to a situation where some bidding packages in the province have been slow in construction, and in some cases, construction has been stopped due to lack of resources, slowing down the progress of works and projects. The high price of construction materials also leads to the possibility that ongoing construction investment projects may have their capital increased, and implementation costs may exceed the total investment and approved estimates.

Material prices are high, but the bridge project in Quy Hop still has to ensure progress according to the contract. Photo: Van Truong

Mr. Phan Huy Hai - Director of the Project Management Board of Yen Thanh District Construction Works added: In the face of the increasing price of construction materials, currently for projects approved by the district for investment policy with technical economic reports, which have not yet been bid, they are allowed to adjust according to market prices. As for previous construction projects under the form of a package, the contractor must accept "profit and loss".

Mr. Nguyen Anh Dung - Head of Economic and Construction Materials Department - Nghe An Department of Construction said: Recently, Nghe An Department of Construction has coordinated with the Department of Finance to closely follow the developments of the construction materials market, promptly update and announce construction material prices and construction price indexes to match the market price level, avoiding the phenomenon of "speculation and price inflation".

Specifically: In the first 3 months of 2022, prices of some construction materials will be announced quarterly, while April, May, and June will be announced monthly to be closer to market prices and promptly resolve difficulties for businesses. However, the current difficulty is due to the constant fluctuations in material prices, so although material prices are announced monthly, there are times when they are not close to actual prices.

With the high price of construction materials, most contractors now want the State to soon make a decision to adjust the total investment and accept to pay the contractor the unit price according to the market price. As for projects invested from private capital and social resources, investors should consider and share with contractors during this difficult period.

Van Truong