Rapid rise in input prices troubles Slovenian industry

Ljubljana – Rapidly rising prices of inputs are causing problems world-wide, with Slovenian industry affected as well. Gregor Ficko, director of the Chamber of Construction and Building Materials Industry, told the STA that the demand for inputs is particularly acute in construction and the timber industry.

Prices of construction materials have increased across the board. Steel went up by more than 30%, and there has been an increase in prices of materials like pipes, waterproofing, some types of brick and ceramics. On average, prices went up by at least a third, said Ficko.

“These are significant increases and certain builders, like those with long-term and multi-year contracts, are certainly having problems. As this is a global trend, there are additional problems due to delays in the delivery of these materials,” he added.

The shortage is a consequence of the Covid-19 pandemic, which brought the building materials industry to a standstill, while stocks have mostly dried up. The complications caused by the closure of the Suez Canal for a few days have had an adverse impact as well.

Ficko thinks that the supply situation should stabilise by the end of the year, but the question of what will happen to prices remains.

He believes there are several possibilities, and some prices could remain at current levels, but this can only be speculation for now. “This is not unusual and we have seen it in the past,” he said.

Investors and contractors will have to reach agreements on existing deals, and the Chamber of Commerce has already called on both the largest contracting entities and the local authorities implementing the projects to do so.

“In Slovenia, we are mature enough to be able to resolve these matters in a normal way. The worst thing would be to resolve them in courts… Nobody wants that.” Ficko added.

While the current situation is causing problems for some projects, major infrastructure projects like the second railway track between Divača and Koper have such long lead times that they should not be affected, at least not for the time being.

Igor Milavec, the director of the Furniture and Wood Processing Association, told the STA that problems exist in the timber industry as well, where the situation might indeed be the worst.

He said that there is a shortage of wood and wood products across Europe. This extending delivery times, which have gone up from four or five weeks to as much as six months.

“The problems are adding up. Materials are getting more expensive, and there are delays in delivery. For buildings, this will certainly be a big problem. The poorer business results will be felt especially by timber companies,” said Milavec.

Milavec is not optimistic about the situation. He believes that the increases could last at least until autumn, possibly until next year. Prices might even stabilise at a higher level, which will inevitably spill over into prices of products in the long run.

Higher timber prices are a problem for companies that need this material for production, but on the other hand, this might be an opportunity for the owners of Slovenia’s timber-rich forests and primary timber producers.

According to Boris Sapač, a board member at one of the largest Slovenian construction companies, Pomgrad, increases as high as 40% have been recorded in the prices of some construction materials.

“The increases are affecting the budgets of major infrastructure projects that have been launched in recent years. According to our information, developed countries are actively involved in addressing the issue, as builders cannot withstand price pressures on their own and their projects may be jeopardised as a result,” Sapač said.

He expects a similar solution from Slovenian state and public investors.