By the end of this year, metal prices and logistics costs have dropped significantly, which should help the demand
Russia’s military aggression against Ukraine has had a significant impact on the entire economy and the construction industry in particular. However, after a few months of war, some of the customers have already returned to the construction of commercial objects that were frozen at the beginning of the full-scale war or damaged as a result of the hostilities.
Current situation
Rauta is a leading supplier of modern solutions for quickly erected buildings – sandwich panels, ventilated metal facades, steel frames, load-bearing profiles, etc. The company offers services in design, installation of supporting and enclosing structures, as well as general contracting on objects of any complexity. The main focus of the company’s business is the import of Ruukki products for commercial construction projects. We use production facilities located in Poland, Estonia and Ukraine.
After the beginning of the active war phase due to a significant decrease in demand for our products the company’s business was significantly reoriented. We began to be approached by clients with requests to rebuild buildings destroyed in the fighting. Having a deep understanding of the technologies and principles of reconstruction, we began to actively engage in the restoration of buildings and made it a separate line of business. Whereas before February 24 the company was restoring only one building in Kiev, by the end of 2022 we had implemented 7 projects in three cities of Ukraine, and the start of reconstruction of several more is planned for 2023.
Growth against the backdrop of a falling market
In 2021 there was a situation on the market when the demand for Ruukki products greatly exceeded the capacity of production and the factories were not able to fulfill all orders. Starting from 24 February, the number of orders for new construction projects decreased sharply, and the main deliveries were for objects that began construction last year. Fortunately, almost all of our sandwich panel customers continued to build facilities. Among them are low-temperature warehouse and business center in Kiev, dairy farm and dairy plant in Ternopil region. Therefore, in 2022 Rauta has a 40% year-on-year decrease in sales, which is a relatively good indicator against the background of a more than 70% fall in the sandwich panel market. At the same time, thanks to the growth of the construction and general contracting services area, the company’s total revenue increased by 7% compared to 2021.
Price waves
Ruukki products are made only from European rolled steel, the price of which rose to a peak in August 2021 and halved in early 2022. At the same time in the cost of panels, galvanized steel with polymer coating accounts for about 25%.
At the same time, given the substantial increase in the cost of transportation services and the rise in the euro, the price of imported sandwich panels for the year increased by 50% in hryvnia equivalent. Nevertheless now there is a tendency in the market to considerable decrease of transport cost as well as inertial fall of world steel prices that in the nearest perspective can lead to reduction of sandwich-panels prices by 15-20%.
The main method of delivery in the market of metal construction is road transport. In 2021 the cost of delivery by truck from Poland to Kiev was about 65 thousand UAH. In the spring of 2022 delivery from Poland due to rising fuel prices and limited supply of transport has doubled in price, and in December 2022 was back to the prewar level.
In 2021 the peak cost of load-bearing steel reached almost 70 thousand UAH per ton, mainly due to the high cost of rolled steel. At the end of 2022 due to the decline in metal prices by almost half the cost of steel decreased by about 23% – to 54 thousand UAH per ton.
Recovery Opportunities.
In the spring of 2022, when the company had less workload on the main projects, we have developed a technology for the construction of frameless houses made of sandwich panels, which can be used for ultra-fast construction of houses and cottage towns. To demonstrate the benefits of this technology, we plan to install two demonstration frameless houses near Kiev. For this purpose we have already made house sets in Poland for 20 and 40 square meters houses and we are going to install them in spring. Now we can see the interest in this technology on the part of institutional funds and private investors in the segment of cottage building, which will grow rapidly after Ukraine’s victory.
Another innovation of ours is the development of technology for construction of multistoried buildings using sandwich panels as outer walls, which allows a developer to get up to 5% more space.
In general it can be noted that the technology of rapid construction with steel solutions has a great perspective in the reconstruction of commercial real estate – where the investor understands: the sooner the business is built, the sooner it will begin to bring income.
CONSTRUCTION, DEMAND, galvanized steel, RAUTA, STEEL, STEEL CONSTRUCTION
