Ukraine war, Covid push construction material prices up by 30%

Construction costs in Malta are rising due to the war in Ukraine and the lasting impact of Covid-19 on importation, this newsroom is informed.

The economic impacts of Covid-19 and the war in Ukraine are being felt throughout Europe, and Malta is no exception. The increase in freight costs due to Covid that businesses have to deal with is well known. Rising costs internationally due to the war mainly in terms of fuel and energy price hikes have been widely reported. In Malta, energy prices have been kept stable through subsidies.

What is not as well known, is that the local construction industry is also being impacted.

Speaking with this newsroom, the President of the Malta Developers Association, Michael Stivala, indicated that the war in Ukraine has severely impacted the cost of steel, which he said rose by around 30% since the war broke out.

As for the effects of Covid, he said that the prices for all other building materials in general have risen by around 30% since the start of the pandemic.

“The price is going up, especially after Russia invaded Ukraine in February,” Stivala said, referring to steel. “We are hopeful that this increase will be reversed as soon as the war comes to an end."

There are also logistical issues. "We have some delays due to transportation systems, and this is more due to Covid19. This is not only affecting our industry but is affecting all sectors in general. The two issues – logistical problems due to Covid and inflation due to the war and Covid – are leaving their effect on all industries."

Asked if the price of steel is now stable or if it will rise further, he said that it is rising weekly. "There runs the risk that prices can continue to go up. It depends on the war in Ukraine."

The increase of this material's price will affect the cost to build, Stivala said.

He said that the rise in construction costs ‘might or might not’ affect property prices for consumers, as this would depend on the market.

Detailing the issues developers are finding, he said that, at the moment, steel importers cannot guarantee a price for more than a week or two in advance.

"If you are going to start a project and plan on commencing works in six months’ time, you don't know what the exact cost of building will be, as importers cannot guarantee the prices at that stage. It’s the same with glass, aluminium. It’s affecting all building materials, except possibly for bricks."

"We are seeing cases where, if you would want to order aluminium apertures, they would only provide the price of the glass the moment they can measure and not be able to give a quote earlier."

On average, the cost of everything has risen by almost 30% since Covid-19 started, he said.

"Developers normally sell on plan, but since they do not know the building costs, some are temporarily removing them from the market until they would know the costs."

A source within the construction supplies industry speaking with The Malta Independent on Sunday also confirmed that costs are rising for the importation of building materials.

First the sector faced problems caused by Covid-19, and is now facing problems caused by the war, the source said. "It affected prices, which rose significantly, and also transport and freight costs."

The shipping of construction related material - iron, glass, aluminium and other items all rose, the source said. “If a container costed 1,000 dollars pre-Covid for instance, today it costs tentimes as much.” This situation came about soon after Covid hit, when prices had started to rise slowly, the source said.

As for the effects of the war on prices, the source gave an overview as to the situation abroad, explaining that countries like India and Italy had to raise prices due to rising energy costs. Italy, aside from raising prices, are adding an energy surcharge of 10-20% on their invoices, even for items like nuts and bolts, the source added.

As for the impact on the construction industry, the source said that prices are rising and it will take longer to fulfil an order, adding that Malta is not receiving as much glass as is required by the country for instance.

If the war ends, prices will start reducing, the source believes, but is of the opinion that prices will never return to pre-Covid levels. This, as freight prices might have been too low for shipping companies back then.

Describing the rise in price, the source said that since the start of Covid, certain items like glass doubled in price. Steel prices are also not far off from having doubled from preCovid, but due to the war, prices rose a lot more, the source added. "The war had a bigger effect as prices rose at one go, while before prices were rising slowly due to Covid."

The source said that some factories in Italy even opted to stop operating altogether due to the rising costs.

Jesmond Chetcuti, President of the Malta Chamber of Construction Management, also confirmed that the increase in steel prices is due to higher energy and fuel prices in Europe, no supply of raw materials coming from Ukraine and Russia causing a price rise, and shipment prices and delays. At the moment, he said, there is also higher demand as customers tend to buy more when the possibility of unavailability exists.

The situation, in the longrun, he said, could have a very negative impact on property development and construction.