The Finnish construction industry is facing unprecedented problems

The Finnish construction industry is facing unprecedented problems

Much of the steel imports used by the construction industry have come to a halt since the Russian invasion of Ukraine began. And now the entire Finnish construction industry is in big trouble due to material shortages.

According to the construction industry, an estimated quarter of the steel used in Finland has previously come from Russia, Ukraine and Belarus.

"Steel is used in all construction. Construction starts with piling and if you do not receive an offer to supply steel piles to the building, the whole site may stop," explain Juha LuhankaDeputy Director of the Construction Industry Association.

There is currently a severe shortage of steel throughout Europe.

The price of steel almost doubled during the coronavirus pandemic and now the prices of some steel products have quadrupled a few years ago.

The story continues after the picture.

Betset’s Kyyjärvi plant manufactures, among other things, steel reinforcements for structural columns and beams.Niko Mannonen / Yle

Betset is one of Finland’s largest manufacturers of precast concrete elements. The company has eight factories and 650 employees around the country. Betset has enough steel in stock until next summer, but the company is already preparing for what will happen next.

According to Betset’s sales director Jari Laajala, the company has already begun formal negotiations with employee representatives that could lead to layoffs.

"If the materials run out, it will stop production. We strive to safeguard the company’s financial position," Laajala explains.

The Finnish Construction Industry Association estimates that the various stocks of building materials in Finland will be sufficient until next summer, but big problems are expected after that. It is not yet known how bad the situation in the construction industry could turn.

However, the crisis in the sector caused by the Russian invasion of Ukraine is expected to be deeper than the effects of the coronavirus pandemic.

Redundancies and bankruptcies

In addition to steel products, there is a shortage of e.g. bitumen, glass and electronic components for heating, ventilation and air-conditioning equipment. In addition, there are difficulties in obtaining some wood products, such as parquet.

The Finnish technology and automotive industries are also experiencing the effects of declining steel availability.

Together, these sectors are major employers in Finland, and these problems will certainly be quickly reflected in employment throughout the country.

"If the number of new areas of residential buildings begins to decline, there will be layoffs and bankruptcies. Factories can more easily regulate their production volumes, but this still affects employment," the Central Union of Luhanka points out.

The story continues after the picture.

Workers are preparing for casting at the Betset plant in Kyyjärvi.
The Construction Industry Association believes that the problems ahead are serious, but not as bad as the crisis caused by the recession of the 1990s.Niko Mannonen / Yle

According to Luhanka, the plight of the construction industry is exacerbated by the high price of energy and fuels.

"If Russia’s counter-sanctions or EU decisions close the natural gas threat, the situation in the construction sector will become even more difficult," Luhanka says.

Defaults and the departure of companies from Russia, as well as the voluntary suspension of some companies from the use of Russian products, are also the cause of some shortages and rising prices.

The EU has now increased steel import quotas from third countries, such as Turkey and Asian suppliers, to improve availability.

Exceptional times

According to Betset Laaja, Finland’s geopolitical situation and economic outlook affect the confidence and interest of foreign financiers in starting new construction sites in Finland.

"It is feared that at some point the critical point will be bypassed and construction sites will not progress, they will be canceled or at least delayed. If supply problems worsen, production may stop at factories," Extensive warns.

Laajala says that pricing products is also very challenging at the moment. Material supplier prices fluctuate rapidly and materials are sold at daily spot prices. At worst, the price is known only after the goods have been delivered.

The story continues after the picture.

Jets Laajala, Betset's Sales Director, has not had such challenging times in his career of more than 30 years.
According to Jari Laaja, the increased transport costs of large concrete products will also increase final prices.Niko Mannonen / Yle

Due to a lack of supplies, Betset has already seen the delay of one major construction project. This is a new situation for Laaja, who has been working for the company since the early 1990s.

"I have to say this is an unprecedented time. It is something that has not been experienced before."

Source: The Nordic Page

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