Expensive building materials put builders in the corner – consider whether to complete started work at all

Trying to survive

D. Gedvilas said that the current situation for construction companies is complicated. According to him, the jump in the prices of raw materials and construction materials since the beginning of the year is a major headache for companies today, which is a problem not only in Lithuania, but also in all European markets.

“It is a tsunami that has come,” he said of the rise in prices, explaining that the rise in raw material prices was due to the Chinese construction industry.

“It bought a lot of metal and other raw materials on the commodity exchange and it came out in such a way that today, due to the growth of the US and Chinese markets, the prices of raw materials have become very unbalanced,” said the president of explained the Asociation.

From November to the end of April, as D. Gedvilas called, the price of the best quality metal increased by 110 percent, bitumen – by 30 percent, polystyrene – by more than 40 percent.

As a result, as assured, today a large number of contractors do not know how to complete the projects started, because they can no longer complete the work at the agreed price.

“In the past, the price increase was a small percentage per year, but that (ed. Price) dance hadn’t happened in a quarter and no one expected such an impact.

There are companies today that even tell what is best for them, whether it is fleeing the object and paying a fine, or completing the project, “he said.

Bankruptcies can wait

According to D. Gedvilas, the association has already made an appeal to the Ministries of Economy and Innovation and Finance to respond to the situation of rising prices of raw materials. According to him, if no action is taken in the near future, the situation in the construction sector will only get worse.

“If no one can predict such a jump in commodity prices, some sort of compensatory mechanism must be provided and compensated.

There should be a reservation, because either the contractors close and go to the Employment Service, or the issue of the survival of the companies must be addressed, ”he said, and BNS previously said that the indexing of contracts already signed could be one of the the measures taken by the Government.

According to D. Gedvilas, if nothing is done in the near future, a wave of bankruptcies of construction companies in the country can be expected.

“There are predictions that such a price increase could take the whole year.

If they stay that way for a long period of time, a large proportion of contractors will have a lot of trouble, as they will suffer losses and those who do not reach an agreement with customers can have those critical losses.

We can also face massive bankruptcies, the situation is tense at the moment, ”he said.

Sign the contract

Arvydas Avulis, chairman of the board of real estate developer Hanner, also said that commodity prices have risen sharply today, now often requiring the signing of contracts that have already been signed.

“Some contracts, most of which are made up of the most expensive materials, need to be rewritten. Suppose the roof insulation works where polystyrene is used. It became more expensive by 25-30 percent. It is understood that in such cases those contracts must be modified.

It is practically impossible to do the work at the old prices, which concerns us, we change the contracts with the subcontractors and we have to liquidate, there is simply no other way out, because otherwise the work will simply stop if we do not look flexibly, ”he said. A. Avulis.

He also hinted at possible bankruptcies.

“If there are provisions that are highly principled, bankruptcies are possible. In construction, in general, this is not new, and in this case, when materials become more expensive, the suspension of activities would surely be understood and explained”, said A. Avulis.

Domas Dargis, director of the real estate Eika, said that the company does not directly buy the materials themselves, the contractors do, but he notices the changes.

“If the contracts are signed before the beginning of the year, the price is fixed, because the contractors usually buy the materials and reserve them at the time of signing the contract, I don’t think they have had big problems, maybe those contractors who didn’t. “. reserve materials in advance, “he said.

According to D. Dargis, the biggest problem for the company he directs is now the works that are won by tender.

“We see that the components in our buildings are about 10 percent more expensive in terms of labor, materials, etc. from the contractors. And the more metal you need, the more expensive those parts are,” he said.

However, according to D. Dargis, the most difficult period will be for those contractors who work with very small margins and have not purchased materials in advance.

Delfi has already written about the rise in the price of raw materials. You can read more here and here.