Finland's Construction Industry Facing 'Unprecedented' Problems

According to Finnish trade professionals, major problems are expected after stocks of various building materials run out. Furthermore, the crisis unfolding as a result of the Ukrainian conflict is expected to become deeper than the aftermath of the COVID-19 pandemic, potentially resulting in layoffs, bankruptcies, and dwindling output.

Finland's entire construction industry is facing major problems due to material shortages, as imports of key building materials, including steel, have stalled due to the conflict in Ukraine, severe sanctions imposed by the West, and ballooning energy prices.

According to the construction industry, an estimated quarter of the steel used in Finland has previously come from Russia, Ukraine, and Belarus. The price of steel almost doubled during the COVID-19 pandemic and has since risen further.

"Steel is used in all construction. Building starts with the pilings and if you get no offer to supply steel pilings for a building, the entire site may come to a halt", Deputy Director of the Confederation of Finnish Construction Industries Juha Luhanka told national broadcaster Yle.

Betset, one of Finland's largest manufacturers of precast concrete elements with eight plants and 650 employees around the country, admittedly has enough steel in stock to last until summer, and is already preparing for what happens next. According to Betset Sales Director Jari Laajala, the company has already begun formal talks with employees' representatives that could lead to layoffs.

"If the availability of materials runs out, it will stop production. We aim to protect the company's financial situation", Laajala explained. "I have to say that this is an unprecedented time. It's something that has not been experienced before. There is a fear that at some time a critical point will be passed and building sites will not move forward, they will be cancelled or at least delayed. If supply problems worsen, production may stop at factories", he added.

While the lack of steel appears to be the most tangible, there is also a shortage of bitumen used in asphalting, glass, and electronic components needed for heating, ventilation, and air conditioning equipment. In addition, there are difficulties in sourcing some wood products, such as parquet.

Per an estimate by the Confederation of Finnish Construction Industries, stocks of various building materials in Finland will last until summer, but after that major problems are expected. The crisis unfolding as a result of the Ukrainian conflict is expected to become deeper than the aftermath of the COVID-19 pandemic.

As the lack of steel and other materials also affects Finland's technology and automotive industries, both layoffs and dwindling production are certain to quickly be reflected in employment throughout the country.

"If new starts for residential buildings begin to decline, there will be layoffs and bankruptcies. Factories can more easily regulate their production volumes, but it will still affect employment", Luhanka stated.

He stressed that the precarious situation is being further exacerbated by exorbitant energy prices and may escalate further.

"If Russia's counter-sanctions or EU decisions close the natural gas tap, the situation in the construction industry will become even become more difficult", Luhanka warned.

Finland is not alone, as a severe shortage of steel is currently being felt throughout Europe. To offset the intensifying steel crisis, the EU has now increased its quotas for imports from third countries, such as Turkey and Asian suppliers, in order increase availability.

Countering Moscow's special military operation in Ukraine, the West announced several rounds of sanctions designed to paralyse Russia's economy. The measures imposed target all spheres of life, ranging from tech and finance to consumer goods. Furthermore, a number of companies pledged to withdraw from the Russian market and closed their production facilities in the country. However, the flip side of the sanctions is the self-inflicted damage in the form of exacerbating inflation, goods shortage, stalled deliveries, and bounced payments.