Vietnam: Easing Challenges for the Construction Materials Industry

The optimistic scenario for 2024 includes boosted public investment, synchronized deployment of key transportation infrastructure projects, and social housing, which are expected to create a "push" for the real estate market's development.

Vietnam: Easing Challenges for the Construction Materials Industry
Photo by Peter Nguyen / Unsplash

In the promising outlook of 2024, the construction materials sector in Vietnam looks forward to overcoming its recent challenges, buoyed by the government's push for public investment and the synchronized implementation of key transportation infrastructure projects and social housing.

This expected boost in the real estate market is seen as a vital lifeline for the industry, which contributes about 7% to Vietnam's GDP annually but has faced significant downturns in the past two years due to a sluggish real estate market, slow public investment project deployment, and global economic instability.

The construction materials industry, particularly sectors like cement and glass manufacturing, has been among the hardest hit. For instance, the Vietnam Cement Corporation (VICEM) reported a loss of over VND500 billion in 2023, marking an unprecedented difficult period. Nationwide, the consumption of construction materials saw a steep decline, with cement production and consumption dropping by 5.45% and 6% respectively in 2023 compared to the previous year.

However, there are positive signs on the horizon. The government's decisive actions to accelerate public investment and the commencement of significant infrastructure projects, such as the North-South Expressway and Long Thanh Airport, are expected to stimulate consumption in the construction materials sector. Moreover, legislative amendments related to real estate, such as the Housing Law and the Law on Real Estate Business, passed in 2023, alongside resolutions and decrees aimed at easing difficulties, are anticipated to have a positive impact on the industry's recovery and growth.

For the cement sector, the first quarter of 2024 might still see low consumption due to seasonal factors and ongoing weak demand. However, from the second quarter onwards, an improvement is expected as construction activities pick up pace. The Ministry of Construction has set monitoring market developments and ensuring supply-demand balance for construction materials as one of its key tasks for 2024. It is also urgently addressing policy and regulatory bottlenecks to promote the construction of at least 1 million social housing units by 2030 and increase the use of cement in road construction, especially in the southern provinces.

To navigate through the current difficulties, experts suggest that construction material enterprises should enhance their competitiveness by improving quality, diversifying products, and reducing costs through advanced technology investment and cost-saving measures. Additionally, focusing on environmental concerns, adopting green production practices, and exploring new export markets are crucial for increasing product consumption.