Rising costs, scarce materials, and a prolonged labor shortage are pushing many construction companies into crisis mode.
Skyrocketing Prices, Material Shortages, and Labor Crunch
In an interview with us, Mr. Vũ Chí Kiên, Deputy General Director of QualiPro Construction Joint Stock Company, repeatedly returned to the pressing issue of construction materials and labor shortages. Construction firms are facing significant challenges as prices of key materials continue to rise steeply, and labor becomes increasingly scarce.
Compared to the beginning of the year, steel prices have risen by 5–7%, concrete by 25–35%, and sand prices have doubled — even tripled (a 200–300% increase) in some areas. May and June of 2025 saw particularly dramatic spikes. “Just in May 2025 alone, some suppliers issued up to three price increase notices,” Mr. Kiên noted.
Even with the soaring prices, materials are still hard to source. Many suppliers, after quoting new prices, later reported they were out of stock. Without access to materials, several construction firms have had to delay project timelines or propose adjustments to contract values.
However, adjusting contract values isn’t simple. According to Mr. Kiên, any project wishing to modify its total investment must undergo a time-consuming process involving extensive paperwork and approvals. While waiting for approval, companies are still required to fulfill their contractual obligations — or face penalties.
As a result, many contractors are accepting losses just to keep projects on schedule. Meanwhile, new contracts are difficult to negotiate because updated material prices exceed the cost estimates originally approved in bidding packages.
Labor Shortages Worsen the Crisis
The problem extends beyond material costs. On many construction sites, a labor shortage is causing delays and disorganization among work crews.
“At large projects that once had hundreds of workers on site, we’re now struggling to find a few dozen,” Mr. Kiên shared. Part of the reason is that many unskilled workers have migrated to industrial zones for more stable employment.
With escalating material costs, supply shortages, and labor constraints, many companies are facing complex challenges involving project deadlines, financial strain, and damage to their reputation.
57% of Firms Seriously Affected by Material Costs
“The biggest challenge for construction firms and contractors in Q2 is the sharp rise in construction material prices,” said Ms. Phí Thị Hương Nga, Head of Industrial and Construction Statistics at the General Statistics Office (GSO), Ministry of Finance.
According to the GSO’s Q2/2025 survey, 57.2% of construction enterprises reported that rising material costs had seriously impacted their business operations — a 10.1 percentage point increase from Q1/2025. “This is the sharpest rise recorded in recent surveys,” Ms. Nga stated.
Both Ms. Nga and Mr. Kiên attributed the price surge to heightened demand, especially due to accelerated public investment. Major infrastructure projects, social housing developments, and nationwide efforts to eliminate substandard housing have driven up short-term demand for sand, gravel, steel, and cement.
Data shows that in Q2, 76.2% of businesses reported that new construction contracts either increased or remained stable — indicating a dynamic and highly competitive market with tight supply. The production index for construction materials such as steel, cement, and concrete remained on a positive growth trajectory throughout the first half of the year.
Local Supply Disruptions and Market Psychology Fuel Instability
However, in certain regions, companies have struggled to access sand and gravel due to mining sites reaching permit expiration, landslides causing interruptions, or delays in new permit issuance.
These factors have led to localized shortages, increased transportation costs, and higher material prices. While only 21.7% of firms reported difficulties with material supply, the delays, price volatility, and uneven distribution have created ripple effects beyond what the statistics suggest.
Market psychology has also contributed to short-term price hikes. Some dealers and distributors are stockpiling materials amid surging prices, leading to temporary supply imbalances. Just as projects urgently need materials to stay on schedule, the delayed supply chain further undermines project planning and budget control.
Urgent Calls for Policy Support and Structural Reform
“We sincerely hope for prompt solutions to address issues related to material pricing, supply shortages, and labor,” said Mr. Kiên. To address the sand and fill material shortage, he proposed that authorities expedite the review and re-issuance of permits for expired quarries — provided they meet legal requirements — and implement stricter controls over distribution and stockpiling to ease localized pressure.
For publicly funded projects, he recommended creating a mechanism to allow contract price adjustments when material costs exceed certain thresholds, helping prevent companies from being dragged down by the gap between actual costs and pre-signed unit prices.
He also emphasized the need to boost the construction labor force, possibly even considering importing foreign workers as a contingency plan.
Source: vipfa.vn