Hanoi (VNS/VNA) - Local construction firms face the risk of bankruptcy as theprice of steel has soared 40 percent recently.

Theprice of construction steel is now nearly 19,000 VND per kg and with thematerial accounting for about 28 percent of the building cost for anapartment and 35 percent of the cost of a semi-detached house, insiders saidconstruction costs had soared.

Nguyen TheDiep, Chairman of the Board of Directors of Hung Thinh Phat Investment Group,said: "With urban areas, condominiums, iron and steel account for arelatively large proportion of the product prices so house prices willdefinitely be higher in the near future."

A contractorwho is building three construction projects of apartments and townhousesat a fixed price of 900 billion VND said he lost at least 8 percent of thetotal contract value and lost all potential for profit.

Tran Hong Phuc,General Director of Phuc Hung Holdings Construction Joint Stock Company, said:"When the price spikes, the excess cost of the provision will also affectthe price range we offer to the market and buyers will be the last to bear thehigh cost."

Hoang Ngoc Tu,Deputy General Director of Delta Group, which develops a lot of socialhousing, said the increased materials costs will push even social housingprices up.

To deal withthe situation, the Vietnam Association of Construction Contractors (VACC)recently sent a petition to the Government, asking for solutions to deal withthe sudden spike in construction steel prices.

VACC’spetition said the high prices would make construction contractors nationwideface the risk of going bankrupt as most of them were using fixed unit pricecontracts without adjustments except in case of force majeure, so they couldnot raise the prices of the houses.

VACCproposed the Government direct ministries and branches to examine thecauses of the hike and ask the departments of construction to update themarket unit prices.

Earlier,both the Vietnam Steel Association and the Department of Industry under theMinistry of Industry and Trade said construction steel production capacity wasabout 14 million tonnes per year, meeting domestic demand of about 11million tonnes. However, construction steel shortages and strong priceincreases were still occurring.

On the otherhand, the surge in prices of steel since the beginning of 2021helped many steel producers record good performance in Q1.

Hoa SenGroup (HSG) posted an increase of nearly 382 percent year-on-year in netrevenue to 9.1 trillion VND, leading to a rise of 215.8 percent in profit aftertax to 572 billion VND. Ho Chi Minh City Metal Corporation (HMC) alsowitnessed strong growth in business results in this periodwith its revenue rising 40.4 percent from the same period of 2020 tomore than 1.1 trillion VND.

Thu Duc SteelJSC (TDS)'s revenue rose 22.7 percent year-on-year to 601.6 billion VND.Its profit after tax also posted a gain of 45.5 percent to more than 12.8billion VND./.