Building material suppliers are hammered

Unsold stock at pottery and porcelain firms reportedly surpasses 40 million square metres valued at VND3.5 trillion ($166 million) at this time, while quality material autoclaved aerated concrete bricks suffered the same fate.

Vietnam is home to 12 autoclaved aerated concrete production plants with combined capacity of 1,500cu.m per year. However, they just run at 15 per cent capacity.

“Compared to other building materials, autoclaved aerated concrete bricks sustain double hardships in consumption - sinking demands and consumer’s cautious approach towards using a new product,” said Song Da-Cao Cuong Autoclaved Aerated Concrete Company chairman Kieu Van Mac.

These plants are bogged down in losses and face the possibility of going out of business.

SCL shares of Song Da-Cao Cuong Company were placed among shares failing to meet deposit transaction conditions from August 20, 2012 due to the company’s poor performance.

SCL’s after-tax profit contracted more than VND2.7 billion ($128,000) in 2012’s first half, according to the firm’s first six month audited financial statement.

Among building materials construction glass suffers the most. Inventory at four floating glass factories amounted to 264,000 tonnes at the end of June, tantamount to five production months, according to Vietnam Association for Building Materials (VABM) general secretary Nguyen Van Chung.

Financial statements of these glass factories in the year to date were in negative territory. For instance, Dap Cau Viglacera Joint Stock Company incurred VND20 billion ($1 million) losses in the first seven months of 2012.

In this context, Vietnam Construction Porcelain and Ceramic Association chairman Dinh Quang Huy proposed the government soon introduce policies to boost consumption, particularly in realty and construction markets to help firms drain out stock.

VABM asked the government to take actions to rescue firms such as requiring construction works, including those of foreign EPC contractors or those using foreign capital, to use locally produced building materials and minimising usage of imported items.

In respect to imports, the proposal was to review and supplement technical barriers to limit imports of building materials already facing a domestic market glut.