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Went up twice
Builders and construction planners are shaking their heads: Construction material prices have risen to unprecedented levels in recent years and they don’t seem to promise they will stop just yet.
“Last year, a cubic meter of expanded polystyrene for insulation of walls, foundations and floors cost suppliers 29 euros, now 58 euros. The armor meter cost 50 cents, now 85 cents. The cubic meter of construction wood was 205 euros and amounted to 278 euros. In stores, these prices are even higher, ”says Arūnas de Panevėžys, who has been working in the construction field for many years and has his own company.
He does not believe that such a price hike was caused by a pandemic.
“I heard that there were problems with the production of polystyrene, it started to run out and the price went up. Wood has become more expensive due to higher prices for container shipping services, ”says the builder.
According to him, those who have started construction now have nowhere to lie down, but Arūnas offers to wait for those who have not yet laid the foundation; prices may go down.
Both prices and terms put pressure on
However, if private home builders can wait for the price bubble to burst, construction companies that have won public tenders in public tenders will have nowhere to shrink. Contracts with clients are signed and contractors are pressured not only by prices, but also by project execution times. The Kriautė construction company is executing several projects in Panevėžys, which have been won through public tenders. All of them, according to the consultant of the company Zenon Janson, will be seriously affected by the increase in the prices of construction materials.
“Now our construction objects are mainly located in the Pasvalys and Panevėžys areas. In Skaistakalnis Park we are rebuilding the same house as J. Čerkes-Besparnis. At least it’s good that plywood and polystyrene products are not needed here, so it’s not that painful financially, ”says Z. Janson.
But other projects, he said, require materials that have become very expensive in recent years. According to the interlocutor, this will increase the costs of the launched projects by up to 35-40%.
“It makes sense: what is more expensive is not good for anyone. The profit of the builders of the object usually reaches 2-4 percent. It goes without saying that even the most expensive projects will have to be completed, but how many years will we work for nothing, for our own losses, ”says the Kriautė representative.
You have no doubt that some contractors may not be able to overcome this situation: the threat of termination of contracts with clients, the deliberate bankruptcy of companies, the renaming of the company under a new name.
associative photo.
“I’m already noticing that new construction companies have started to establish themselves quickly,” Janson noted.
According to him, companies that have lost public procurement are happier this year. And those that offered the lowest price in the tenders and lowered the average prices to 10% due to the triumph in them. it will not avoid very large losses.
He addressed the minister
On Tuesday, the Lithuanian Chamber of Industry and Crafts addressed the Minister of the Environment, Simonas Gentvilas, regarding these problems in the construction sector. This meeting allegedly promised to prepare certain amendments to the law, recommendations to protect against the collapse of the construction sector and corporate bankruptcies.
“By working with determination and correctly, everything is under control, but it also depends on the attitude of the officials,” Z. Janson heard from my minister during the conference.
In his opinion, it was necessary to prepare for it a long time ago; it was only a matter of time before the prices of building materials went up.
“It was stupid to expect that prices would not change after the pandemic. This market is affected by demand, trends in the construction sector. It is estimated that people who have missed their vacations or trips have accumulated savings in the last year, since they have not saved in the last two years. Then, seeing that there was less freedom in the center of the city, they began to build intensively, “says Z. Janson.
As a result, he said, building materials in warehouses were quickly running out and becoming more expensive. The prices, according to the interlocutor, also increased due to transport, the increase in the prices of raw materials and global inflation. According to Janson, the prices of construction materials will continue to rise and will not be stable for the next few years.
Won’t fit the budget
Egidijus Urbonas, Managing Director of the Panevysžys Construction Trust, also foresees losses due to the construction projects started.
“We, like all participants in the construction market, are facing an increase in the prices of materials and delivery times. And although the construction contracts signed and the commitments assumed are still being fulfilled on schedule, With the increase in the prices of materials, losses are expected from some projects ”, the head of the large company does not hide.
Currently, PST is building several dozen objects in Panevėžys, and the same number of projects are in the design stage. According to the company, the materials, depending on their type, became more expensive between 20 and 30 percent. up to 2–2.5 times. The prices of crude steel, metallic structures, reinforcement and thermal insulation materials have especially skyrocketed, but, according to the director, there are no construction materials that have not been affected by the rise in prices.
© Photo by A.Stackevič.
The most difficult, according to E. Urbonas, with those projects, whose start was delayed for some reason. Because that contractor is forced to buy construction materials at already high prices and no longer fits the budget of the projected project. For previously launched projects, the company quickly bought materials at lower prices and at least managed to handle the situation.
“To resolve the situation, we continue to cooperate with the builders and seek more rational technological and organizational solutions for the construction to compensate for the increase in material prices,” says E. Urbonas.
Guarantor – contracts
The municipality of Panevėžys, which is renovating the city’s public spaces (squares, parks, streets), is not yet panicking over the construction sector. According to Tomas Jukna, director of the Municipal Administration, the client is protected by contracts. They are signed and unchanged.
Procurement specialists emphasize that the contractor must anticipate changes in both wages and prices for the next three years. Of course, now it will be more difficult for construction companies – their profits and profits will be lower. But we do not believe that the contests go with zero benefits, “says the director.
According to him, the Municipality has yet to receive complaints or requests for assistance from the builders. And what to help here, according to the interlocutor, and difficult to say. Clients can, unless advised, look more widely where to obtain building materials, because they are now a major deficiency.
“The demand for materials is huge and there is a shortage of supply. Due to the pandemic, some factories are just beginning to normalize their production. For example, with the production of insulating materials in Poland, the price of these products immediately increased by 30%. It is no longer possible to produce reinforced concrete ”, says T. Jukna.
The director says he has seen such price races in the construction sector for more than a year.
“Since 2015, the price of some materials has doubled. At the same time, it is determined by the increase in the price of oil, at the other time, by the metal, the price of Chinese products was caused by the increase in the price of oil. container transport ”, says the head of the Municipal Administration.
Now, he said, the easiest way to control construction prices would be to simply stop building anything, but it certainly won’t happen. The director expects the market jumps to finally stabilize early next year. According to the Department of Statistics, the prices of construction supplies increased 2.4% in April this year compared to March and 4% during the year. The construction of administrative buildings became more expensive.
Construction materials and products in April this year, compared with the same period of the previous year, increased their price by 3.6 percent.
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