Focusing and solving difficulties for construction businesses in the context of rising material prices

In the first 6 months of 2022, rising prices of gasoline, oil and construction materials have been creating great pressure on construction enterprises in the province.

Comparing the price of construction materials announced by the Department of Construction at the time of June 2022 with the unit price in 2021, most of the construction materials increased at a high rate. Typically, iron and steel increased from 10-15%; cement increased by about 100,000 VND/ton depending on the brand; building bricks increased by about 10%… The increase in material prices, a large difference compared to the time of signing the project implementation, has caused construction enterprises in the area to fall into a state of moderate construction, even stopping construction to wait for material prices to decrease.

Construction of underground culverts in Khanh Xuan commune, Loc Binh district

Mr. Lo Thoi Nhuan, Director of Thanh Do Lang Son Co., Ltd (headquartered in Chi Lang district) said: “From the end of 2021 until now, the prices of materials have continuously increased, even at times the increase is calculated by day, causing the construction cost of public investment works to be overvalued by 20-30%. For small and medium businesses like us, with such material price increase, the risk of loss is very high.”

Similarly, Mr. Ha Xuan Tham, Director of Ha Tham One Member Company Limited (headquartered in Cao Loc town, Cao Loc district) said: The unit mainly participates in bidding for Group C works in some districts. But from the beginning of 2022 until now, the price of materials has increased, causing the company to face many difficulties. Specifically, if in the past, businesses providing materials could give contractors short-term debt of about 300 million VND for materials for a project, now they only owe about 100 million VND. Meanwhile, compared to the beginning of 2021, the prices of essential materials all increased such as: yellow sand price increased by 200,000 VND/m3; The price of 1 cm x 2 cm stone at the mine was 120,000 VND/m3 and the shipping cost was 100,000 VND/m3 from the mine to the construction site within less than 25 km, now increased to 140,000 VND/m3 and the shipping cost is 220,000 VND/m3.

Survey at Giang Son Production, Trade and Service One Member Company Limited (operating in mining and trading of construction stone in Cao Loc district), this is a unit that is heavily affected by fluctuations in gasoline and oil prices, causing the company’s exploitation and transportation costs to be forced to increase according to the market.

Mr. Hoang Van Hung, Deputy Director of the company said: “The increase in prices of gasoline, oil, and mining supporting materials such as explosives and labor has directly impacted the unit’s production and business activities. Therefore, the company must continuously make adjustments to its operation and business plans. Currently, production costs for 1 m3 of stone and transportation costs must be adjusted up from 20 to 80% depending on the shipping length of the ordering units. This adjustment affects business sales.”

Construction and assembly of steel structure for Loc Binh bridge No. 1

The above are just 3 of many construction businesses facing difficulties before the “storm” of material prices. Currently, the province has about 150 businesses operating in the field of construction.  In which, there are about 80 businesses engaged in construction and installation activities, creating jobs for about 8,000 workers. In the face of rising material prices, many businesses have been proactively taking some solutions in terms of human and material resources to ensure the construction progress of the works. At the same time, it is proposed to investors who are willing to disburse the completed units, creating motivation for the unit to continue construction.

Mr. Pham Van Duong, Head of the Association of Construction Business under the Provincial Business Association said: “In order to solve difficulties for businesses, we have synthesized the recommendations of member businesses to report to the Provincial People’s Committee for consideration and timely resolution and support.”

Accordingly, businesses proposed competent authorities to consider and adjust the total investment of works for constructions with investment capital from the State budget. For works invested by private businesses, the investor should consider sharing difficulties with businesses to create conditions for the contractor to advance the contract to the maximum extent so that the contractor can purchase and reserve all kinds of supplies and materials for new contracts. At the same time, the competent levels and branches should soon have credit incentive mechanisms for businesses.

Districts and city also have some solutions to share difficulties with construction businesses. For example, in Loc Binh district, Mr. Hoang Van Tuan, Director of the District Construction Investment Management Board said: “We have been focusing on supporting businesses to complete documents and procedures to speed up capital disbursement or finalization of completed work items for construction contractors. Since then, businesses have more resources to turn around capital for project implementation. In addition, the advisory board of the District People’s Committee focused on speeding up site clearance to facilitate contractors in construction, shortening the schedule, and contributing to reducing costs.”

In the context of increasingly difficult public investment capital, while the goal of essential infrastructure investment in the province is very large, construction and installation businesses also need specific solutions such as: concentrating resources, construction machinery and equipment to shorten the time to complete the works.  In addition, the investors should also coordinate with the contractor to complete the pre-acceptance documents and arrange enough capital according to regulations to timely disburse according to the schedule, only then can we hope to remove a part of the difficulties for construction businesses in the face of increasing material price fluctuations.