Opinions Industry steel structures 15 December 2022
At the end of 2022, steel prices and the cost of logistics have significantly decreased, which should contribute to demand
The military aggression of the Russian Federation against Ukraine significantly affected the entire economy and the field of construction. However, already after several months of the war, some customers returned to the construction of commercial objects that were frozen at the beginning of a full-scale war or damaged as a result of hostilities.
Rauta is a leading supplier of modern solutions for quickly assembled buildings – sandwich panels, steel ventilated facades, steel frames, load-bearing profiles, etc. The company offers services in the design, installation of load-bearing and fencing structures, as well as general contracting on objects of any complexity. The main direction of the company’s business is the import of Ruukki products for commercial construction facilities. We use production facilities located in Poland, Estonia and Ukraine.
After the start of the active phase of the war, due to a significant decrease in demand for our products, the company’s business was significantly reoriented. Clients started contacting us with requests for restoration of buildings destroyed during hostilities. Having a deep understanding of technologies and principles of reconstruction, we began to actively engage in the restoration of buildings and separated it into a separate line of business. If until February 24, the company was engaged in the restoration of only one building in Kyiv, then by the end of 2022 we have implemented 7 projects in three cities of Ukraine, and the beginning of the reconstruction of several more objects is already planned for 2023.
Growth against the background of market decline
In 2021, there was a situation on the market when the demand for Ruukki products significantly exceeded the production capabilities and the factories did not have time to fulfill all the orders. Starting from February 24, the number of orders for new construction projects fell sharply, and the main deliveries were made to facilities that started as early as last year. Fortunately, almost all of our sandwich panel customers have continued construction. Among them are a low-temperature warehouse and a business center in Kyiv, a dairy farm in the Ternopil region, and others. So in 2022, Rauta has a 40% decline in product sales compared to the previous year, which is relatively good against the backdrop of a more than 70% decline in the sandwich panel market. At the same time, thanks to the growth of construction and assembly and general contracting services, the company’s total revenue increased by 7% compared to 2021.
Ruukki’s products are made only from European rolled steel, the price of which increased to its peak in August 2021 and halved in early 2022. At the same time, galvanized steel with a polymer coating makes up about 25% of the cost of panels.
At the same time, taking into account the significant increase in the cost of transport services and the growth of the euro exchange rate, the price of imported sandwich panels increased by 50% in hryvnia equivalent over the year. However, there is currently a tendency on the market to significantly decrease the cost of transportation, as well as an inertial decrease in world steel prices, which in the near future may lead to a 15-20% decrease in sandwich panel prices.
The main method of delivery in the steel construction market is road transport. In 2021, the cost of delivery by truck from Poland to Kyiv was about UAH 65,000. In the spring of 2022, the price of shipping from Poland doubled due to rising fuel prices and a limited supply of transport, and in December 2022, it returned to pre-war levels.
In 2021, the peak cost of load-bearing steel structures reached almost UAH 70,000 per ton, mostly due to the high cost of rolling. As of the end of 2022, due to the decrease in the price of steel, the cost of steel structures decreased by approximately 23% to UAH 54,000 per ton.
In the spring of 2022, when the company had a lower load on major projects, we developed a technology for building frameless houses from sandwich panels, which can be used for ultra-fast construction of residential buildings and cottage towns. To demonstrate the advantages of this technology, it is planned to install two demonstration frameless houses near Kyiv. For this purpose, Poland has already produced home kits for houses with an area of 20 and 40 square meters, and their installation is planned in the spring. Now we see interest in this technology from institutional funds, as well as private investors in the segment of cottage construction, which will grow rapidly after the victory of Ukraine.
Another of our innovations was the development of a technology for the construction of multi-story buildings using sandwich panels as external walls, which allows the developer to get up to 5% additional area.
In general, it can be noted that rapid construction technologies using steel solutions have a great prospect of use in the reconstruction of commercial real estate – where the investor understands: the sooner the business is rebuilt, the sooner it will start bringing income.