Around the world and in Lithuania: the foam crisis: production stops, construction gets more expensive

Manufacturers order raw materials go to the bank

Today is a difficult day for companies that produce Styrofoam plates. It is believed that there is a global shortage of raw materials.

Ježy Makovski, Director of Foam Production at UAB Šilputa, explained that to clarify matters, his company in Lithuania produces Styrofoam boards from a special raw material: pellets, which the company imports from the factories that operate in Europe, and the pellets themselves are made from other components – Styrene, which is currently the biggest problem.

“All were affected by the drastic change in this raw material that took place at the beginning of March, since in February there were two incidents.

One of the styrene plants in Europe broke down. It has also contributed to the fact that from 2020. In the fall of China, the demand for this raw material began to grow as its economy recovered, they began to buy the raw material, they carried out construction, which increased its price.

The world no longer had a place to source styrene, so the prices of both the component itself and the pellets went up a lot and the cost to us increased, ”he said, causing the foam crisis and high prices.

According to the director, the buyer’s end product, styrofoam, has gone up in price about 30 percent recently, and he has not seen such a price increase in his 16 years of employment.

“It’s about styrene,” Makovski repeated. “It is not available and the price can change every month, nobody knows how much the granules will cost in April, and it is here.”

The director of the company said that although the price of the pellets today is not clear, the company has still ordered the raw materials.

“We pre-ordered the whole pigeon from a European factory, because otherwise we wouldn’t get it at all,” he added.

It is true that the company does not accept foam orders all these days because, as it claims, it would not have any raw materials to fulfill those orders.

“If we had enough pellets, there would really be a lot of orders, because the winter was quite bad, cold, the construction works were not in progress, so the effect of a compressed spring came out, construction began.

If we had something to do, we would definitely sell. We are now fulfilling the orders that were accepted in the 11-12 year weeks, we are no longer accepting new ones.

Hopefully things pick up, supplies get back on track. The most important thing is that the factories can produce, there is no shortage of styrene and thus satisfy the demand ”, said the manager.

We haven’t seen such price increases in 25 years.

Vytautas Jankauskas, commercial director of the Kauno šilas foam production company, also explained that his company operates on a similar principle, importing pellets from foreign factories, from which it produces Styrofoam panels.

“It just came to our attention then. They have a tendency to go up or down, but when they went up late last year they did, going up a little bit more in January and February.

In March there was a very high price increase, there has not been such a sudden price increase in 25 years of experience ”, he said, referring to the problem of the shortage of components such as styrene.

According to him, today all the warehouses of the manufacturers of raw materials are swept and the company lacks pellets for the production of foam.

“And the producers of raw materials assure us that their price will also rise in April. We expect it to grow more than 10 percent.

In general, foam has become more expensive for our buyer by about 30-40 percent, “he opened.

According to V. Jankauskas, more expensive building materials, not only foam, but also metals, polyethylene films, etc., will increase the cost of construction.

“I heard that contractors even abandon agreed projects, recalculate estimates, renegotiate when someone has decided to wait, maybe prices will drop in May.

Now we warn our new customers that we should have foam for 3-4 weeks, but we do not promise anything, because it is not clear if we will have raw materials, ”explained V. Jankauskas openly.

Builders Association: There are problems

Dalius Gedvilas, president of the Lithuanian Builders Association, confirmed that builders and contractors are currently struggling with rising building material prices and wages.

“Today we see that there are individual components that have become very expensive, including foam, wool, metal, of course, fuel has become more expensive, which affects the supply of raw materials and materials and makes construction materials more expensive. .

As a result, construction is also getting more expensive, we are seeing many more expensive components, and if construction contracts are signed for longer, builders are eager to see how the price increase will end and if they will really suffer a loss alone. Why not get more materials at the planned price. In other words, there are problems and that is why many managers of a construction company have headaches, ”said D. Gedvilas.

In his view, the sharp rise in commodity prices was due to the sudden recovery from the pandemic in China and the United States, where construction is currently taking place at full capacity.

“Also during the pandemic, several producers of raw materials were suspended and a sudden demand for construction materials caught the suppliers of raw materials unsuspecting, who had stopped working.

Of course, money printing and market entry, inflation rates must also be considered.

Then construction will become more expensive and I believe that the price increase will continue as it was last year ”, he predicted.

“Nobody gets lost,” added D. Gedvilas.