Rising Material Costs Reshape Vietnam Construction Sector Dynamics

Rising Material Costs

Vietnam: Vietnam construction sector is facing increasing polarisation due to a sharp rise in construction material prices, with profitability now hinging on cost control rather than revenue growth. According to a report by Agribank Securities Joint Stock Company (Agriseco), construction sand prices surpassed VNĐ450,000 (USD 17.22) per cubic metre in 2024, up approximately VNĐ20,000 (USD 0.77) year-on-year. Bitumen is nearing VNĐ18,000 (USD 0.69) per kilogram, while steel, accounting for up to 70% of total material costs, remains around VNĐ12,000–13,500 (USD 0.46–0.52) per kilogram. This situation is putting intense pressure on companies with weaker financial capacity and cash flow management, especially infrastructure contractors tied to long-term fixed-value contracts. In Q1/2025, major players like Vinaconex posted a 68.8% year-on-year profit decline, while Coteccons saw a 45.5% drop.

By contrast, residential construction contractors demonstrated resilience, benefiting from shorter project cycles and flexible pricing strategies. Companies such as Dat Phuong Group, LIZEN, and Deo Ca reported profit growth in Q1/2025, reflecting effective cost control. Despite a modest gross margin increase from 12% to 14% in 2024, the medium-term outlook remains clouded by rising material costs and slow public investment disbursement. Liquidity challenges persist, with provisions for doubtful debts exceeding 10% of receivables. However, firms maintaining strong financial structures, swift cash flows, and strategic project selection are positioned to benefit from public investment momentum, recovering property demand, and improved FDI inflows. Companies such as Hoa Binh Construction Group, FECON, and Vinaconex have set ambitious revenue and profit targets for 2025, including FECON targeting revenue of VNĐ5 trillion (USD 190 million) and post-tax profit of VNĐ200 billion (USD 7.6 million), and Vinaconex aiming for consolidated revenue of VNĐ15.5 trillion (USD 589 million) and post-tax profit of VNĐ1.2 trillion (USD 45.6 million).

Source: Vietnam News