Construction The war in Ukraine is also reflected in construction projects in Finland – up to 75 percent rise in prices on the railway tracks

In Kuopio Renovation of the railway station yard, which has been in a dilapidated condition for years, has been awaited.

To the delight of the people of Kuopio in 2020, the state granted funding for the renovation project. The estimated cost of the project is EUR 36 million. The first phase of the renovation, preparations for the demolition of the Puijonkatu bridge, was scheduled to begin in April.

However, Russia’s major attack on Ukraine complicated matters.

With the attack, the availability of some building materials has become more difficult and prices have started to rise. Construction companies have problems bidding because it is difficult to estimate costs in an uncertain situation.

This is now reflected in many Finnish construction projects, including the Kuopio railway yard project.

“The Russian attack happened at the most embarrassing time possible for the procurement of this project, in the middle of a tender. It started to cause a lot of uncertainty for the bidders, ”says the project manager of the Kuopio railway yard project. Vesa Ruohomäki From the fairway agency.

“The prices and availability of materials started to move just during the weeks when bidders would have had to make critical decisions. This message started to sound from the field. It was a really big move then. ”

The fairway agency decided to extend the deadline for submitting bids until mid-June. According to Ruohomäki, the extension of the competition period was also affected by the fact that the plans were not fully completed.

“However, we could have managed that risk and taken in the offers, but the Russian attack was the stem that cut off the camel’s back. We took a couple of months to calm down, when we get the plans completed and we are perhaps wiser about the world going, ”says Ruohomäki.

Construction According to a recent survey by the construction industry association Rakennusteollisuus RT, material shortages and rising prices are now affecting almost all companies in the sector. According to the companies, rising prices are clearly a bigger problem than material shortages.

More than 400 companies of all sizes and across the country responded to the survey on the effects of the war in Ukraine.

Chief Economist of Construction Industry RT Jouni Vihmon according to some of the materials there is now such a severe shortage that their prices are constantly moving. It is difficult for companies to plan projects that go well into the future.

“This is the problem now. Bidding is now really difficult, ”says Vihmo.

More than nine out of ten companies that responded to the survey consider it quite likely that subscribers will postpone their planned projects. Almost as many believe in project cancellations. One in ten reported projects that had already been canceled.

Building materials availability problems are particularly acute for steel products, bitumen, glass and also wood. In addition to availability problems, the price of products is being raised by rising energy prices and changes in logistics.

For example, the prices of railway tracks have skyrocketed as energy prices have risen and imports of steel raw materials from Russia have stalled. It will have to be obtained more expensive elsewhere.

The fairway purchases railway tracks from factories in Central and Southern Europe.

“There is talk of a 75% price increase for railways compared to last year,” says the Purchasing Director. Pekka Petäjäniemi From the fairway agency.

According to him, the price of timber, for example, also rose by 45 per cent last year, when the construction price of the Korona period boosted demand. Now that timber is not imported from Russia, prices are rising further.

Forty major road and railway projects are underway at various stages across Finland.

“Yes, this will lead to higher contract prices. If we do not receive additional funding, we will be able to do less than planned. The new projects are the first to be triggered, ”says Petäjäniemi.

Also Municipalities and their contractors have discussed rising prices and availability problems at their site meetings, says the Association of Finnish Municipalities’ Facilities Manager Jussi Niemi.

“It’s hard to say whether this will have more of an impact on ongoing or future projects. Different projects are at different stages and it depends on the project where that pain point arises. There is no massive worry yet, but there has already been a reaction from one side to the other, ”says Niemi.

According to Niemi, delays or price increases for individual projects are unfortunate, but there is greater concern about the fate of future investments.

“If there’s a fear that prices will escape or you won’t get deals or components, no one will dare to build. Even the bigger economy wheels are slowing down, ”says Niemi.

According to Niemi, the municipalities have tried to lower the threshold for companies to start projects by modifying the contract terms of future projects so that the risks are shared between different parties. This is how the Finnish Railways has done, as it has also included an index term in its contracts of less than two years.

“The aim is to ensure that sudden and unexpected price increases are not only a risk for companies, but that we, as the largest infrastructure subscriber, take some of the risk for ourselves,” says Petäjäniemi.

For now There have been bids for the Finnish Railways’ tenders, but Petäjäniemi has heard a different message from European colleagues.

“In Europe, they have not done such risk-sharing, and contractors have indicated that they do not dare to bid at all. No tenders have been received for tenders for some construction sites. We have been able to avoid this in Finland at least for the time being, ”says Petäjäniemi.

“Companies are now working really hard to find new logistics flows and get the material they need. No one is now dropping gloves at this point, but surely all the rocks will be turned and the streams will be explored. Yes, I have strong credit that Finland will not stop, even if this is the case. ”