China Sourcing Report: Building Materials21 Mar 2011 • by Natalie Aster
Indonesia – Vietnam’s building materials industry has been enjoying rapid growth in recent years, turning it into one of the best-performing manufacturing sectors in the country. In addition, the segment is considered a promising export line as Vietnam positions itself to become more involved in heavy industries. This is a key development given that the country is primarily known for its cottage industries, which include handicrafts, garments and furniture. While the global economic crisis led to a massive downturn in the construction supplies segment among major markets in the West, the opposite has been true in developing countries elsewhere. Burgeoning demand from local and foreign buyers, especially from the Middle East, and South and Southeast Asia, propelled the line to expand by an estimated 15 percent in 2010. In fact, it is expected to surge even more this year, with analysts anticipating exports to increase by as much as 30 percent.
The growth projection is particularly significant because the sector has yet to achieve the same level of development benefiting Vietnam’s well-established industries and therefore has few competitive advantages. One of these is the domestic abundance of raw materials, especially those used for tiles, bricks and flooring. There are more than 2,000 stone and mineral quarries throughout the country with estimated reserves of at least 100 million tons.
The “China Sourcing Report: Building Materials” by Global Sources covers different types of building materials in Vietnam, including wall, floor tiles, bricks, indoor and outdoor flooring, interior and exterior doors, sliding and swivel windows, roofing materials, wall panels, and structural framework. The Industry Overview section discusses key issues affecting export manufacturers and elaborates on the composition of the industry. The Products & prices section details the features and price ranges of building materials. It also lists the main materials used and sourcing centers where they are procured.
The following are some of the key trends in Vietnam’s building materials industry:
- Insufficient technological innovation is the primary threat to the line’s continued development. Because most companies are small, capability to carry out innovative processes and utilize advanced equipment is limited.
- Prices are expected to stay level over the next six months although demand is increasing. Suppliers are taking this step to remain competitive and to attract new customers in developed markets.
- Most of the short-term demand is expected to come from the Asia-Pacific region and the Middle East. In the latter, countries recovering from conflicts and those that are being primed for business and tourism are seen as the major markets.
- Many suppliers are anticipating revenue to surge. Four-fifths of makers featured in this report expressed confidence in registering higher export turnover.
China Sourcing Report: Building Materials
Published: February 2011
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Extensive design capability is another key strength of the industry. Vietnam has numerous craft villages, which are communities composed mainly of artisans. These workers are trained in various carving and detailing techniques that are typically employed on wooden items, including doors, windows and flooring. As such, suppliers of these products can readily offer models created in-house. In addition, they can recommend style ideas incorporating traditional motifs to customers.
The Asia-Pacific region dominates as the sector’s most important export destination. Among companies featured in this report, this area accounts for more than half of overseas revenue. Major markets include South Korea, Thailand and Malaysia.
Currently experiencing a construction boom, the Middle East is increasingly becoming a significant destination for Vietnam suppliers. Although accounting for just 13 percent of shipments among interviewed companies, the region’s share of exports is predicted to double this year. Key markets in this location include Iraq, Israel, Iran, Turkey and the UAE.
Unlike the more established light industries in Vietnam, the building materials sector is not as developed and has not yet attracted significant support from the government and trade organizations. As such, it faces a number of challenges rooted in several internal and external factors. First of these is the lack of technological innovation in the line.
Since most suppliers are either small or midsize, the capability and resources to invest in R&D and advanced equipment are generally not available. This results in products that are not as competitive in terms of quality as those from large companies. For instance, tile makers may come up with models that are not polished to the highest degree possible.
Manufacturers in other segments may turn out items that have unintended color and textural imperfections. Because of these limitations, companies emphasize mainly the low-end market, which provides more leeway when it comes to products’ technical and aesthetic parameters for quality.
Another issue confronting the industry is the rising cost of raw materials, particularly wood for doors and windows. Because more entrepreneurs are joining the sector to benefit from growing local and overseas demand, the cost of lumber has gone up 10 to 15 percent over the past 12 months. The most significant increases have been those of various types of hardwood such as teak, mahogany and keruing. Quotes of models in these materials are at least 10 percent higher than those six months prior.
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