Illustrative image (Photo: VNA) Experts expect investment demand to increase thanks to this year’s publicinvestment projects, boosting the growth of construction and building materialsbusinesses, including construction rock, in the future.
According to the public investment disbursement plan in 2023, more than 700trillion VND will be invested in many key projects, including the North-Southexpressway, various ring road projects in Hanoi and Ho Chi Minh City, and LongThành airport.
The Ministry of Transport said that the demand for construction rock in2023-2025 will be approximately 21.5 million cu.m. Specifically, the Long Thanhairport, Bien Hoa – Vung Tau highway, and Ring Road No. 3 are expected to use2.04 million cu.m, 738,000 cu.m, and 5.2 million cu.m of construction rock,respectively.
Agribank Securities Corporation (Agriseco) said that the construction materialsbusinesses will benefit directly after projects finish the site clearance phaseand enter project implementation.
For construction stone enterprises, transportation costs have a great impact onthe firms' ability to sell their products. Those with a large market share andlocated near ongoing projects will benefit more than the rest of the industry.
Since most construction rock quarries are located across the country, transportationcosts are a major factor affecting the cost. Most construction contractors willchoose quarries near their projects.
However, the supply of construction rock is still limited as the newconstruction rock quarry planning for the 2021-25 period has not beencompleted, especially for provinces and cities that are centres of constructionrock exploitation in the south, including Binh Duong and Dong Nai provinces. Inaddition, compensation for land in the quarry areas has inched higher, causingan imbalance in the market as supply does not meet demand.
According to the analysis of SSI Securities Corporation (SSI), Tan Cangconstruction rock quarry is the main source of supply for Long Thanh airport,Ring Road No.3, and other projects. With nine quarries in the Tan Cang area,SSI estimates that demand at Tan Cang's quarries will increase by 28% over thesame period last year.
Construction rock prices are expected to advance by 8% year-on-year, offsettingthe rise in fuel costs and environmental protection costs for mining.
Due to high mining and loading soil layer costs, the gross profit margin at TanCang mines is maintained in the range of 28-30%, lower than the average atother quarries such as Tan Dong Hiep and Thanh Phu of 45% and 32%,respectively.
For Thanh Phu construction quarries, the main source of supply for projects inthe southwest region with nine quarries, SSI also estimates that demand at thequarries will rise by 15-16% year-on-year thanks to projects such as the Can Tho-HauGiang and Hau Giang-Ca Mau expressways.
Construction rock prices are expected to increase by 7% over the same period.
Analysts believe that these factors will boost the profits of listedconstruction rock companies in 2023. Particularly, SSI forecasts that theprofits of listed companies will jump by 16% over last year. Rock output isexpected to rise by 15% on average in 2023, while selling prices are expectedto rise by 7-8%, the securities firm said.
However, SSI also pointed out the risks that enterprises in the industry arelikely to face in the future, including the prolonged licensing of new mines,and expected-rising receivables for construction rock companies whenconstruction projects are not on schedule.
Moreover, environmental protection costs are expected to increase in 2023.According to the decree on environmental protection costs for mineralexploitation, the cost may be higher this year, resulting in a surge of 50% inthe cost of construction rock firms. SSI estimates a 0.8% drop in gross margindue to the higher fee./.
VNA
