The effects of the pandemic have made their effects known within the construction sector and related industries, though not always in ways envisaged. Prices internationally of materials like timber have tripled since May, for instance, though in the US they have started to fall again. At the same time, construction projects are ongoing, leading to supply problems and exacerbating inflation, though potentially mitigated by utilizing domestically-produced materials where possible.
Several construction material manufacturers temporarily closed down their factories for lengthy periods last year, with the arrival of the pandemic, which in turn meant developers suspended projects.
At the same time, construction as a whole remained more buoyant than had initially been forecast, but, given the issues facing suppliers, this was not all good news in that the high demand twinned with the dwindling supply has led to skyrocketing prices in some areas, particularly metals and also timber.
Board member at construction firm Nordeecon Priit Luman said: “We are affected the most by steel prices, though all commodity prices, metals and insulation materials have risen, and timber has risen. The picture is the same regarding supply. There are definite issues with steel.”
Enno Rebane, chief of the Association of Construction Material Producers of Estonia (EETL), said that large building materials producers had been shuttered as the result of both the pandemic and the ensuing downturn, and might not reopen for months.
On the other hand, the long lead times in construction projects do not mean that shortages need have a far-reaching effect.
He said: “Broadly speaking, the growth in demand has been high and has caused deficits in some places. There are other reasons for that. Construction is a long and planned process, so when a long-term plan is needed, everything will work out fine.”
The crash had not been as deep as initially forecast, he added.
The construction price index, which measures changes in construction spend based on workforce, building materials and building plant prices, rose by 6.2% YoY in the second quarter of 2021 to a record high.
Priit Luman says the supply difficulties of the past six months have clearly affected the construction deadlines, but the work has nonetheless not ground to a halt.
“Nothing has been put off completely, but there are problems with the availability of certain materials,” Luman said.
Enno Rebane said that supply of metals, chemical products used in construction and also some plastics had failed to meet demand lately. “This also means that the local materials we make here, from sand and gravel, crushed stone, cement and lime, dry mixes and concrete mixes, for example, should be in a better situation. They should be less of a concern.”
A high demand for wood, another locally available product, has had a knock on effect on prices too, he said, with prices of some types of wood rising manifold.
“We are currently putting a number of construction sites on a break for this very reason, and this will certainly not help with the recovery,” he said, adding that there was no quick and easy fix for the issue.
Splitting the construction cycle between private and public sectors would be one option regarding local demand – the high demand spreads far beyond Estonia’s shores.
“If we get more orders or the economy starts doing well, then the private sector may be able to build more, and the public sector can amass funds for times when the private sector is doing more badly, and build at that time,” Rebane said.
“Apart from that, unfortunately, we are duplicating each right other now. Private and public sectors both say they want to build a lot, and diligently and quickly, for various political reasons, despite, or even because, demand levels are high and there are pressing supply issues,” he said.
Jaanus Aun, board member at the Estonian Private Forest Centre (Erametsakeskus), said that with regard to wood, high-quality coniferous timber had skyrocketed in price recently, which, he noted, would have its knock-on effect on construction prices.
Aun said he remained, however, cautious about the future and could not make longer-term predictions; he was joined in this by other sector representatives, including Priit Luman, who would not venture to say when both price and supply of construction materials would stabilize – progress on the coronavirus vaccination program globally was one glimmer of hope, they said. (ERR/Business World Magazine)