Estonia’s construction boom pushes prices

Estonia’s construction boom pushes prices
Published: 21 August 2006

The construction boom prevailing in Estonia now has sent the sales of producers of building materials soaring and prompted companies to invest in expansion, with shortage of raw materials and labor as the main obstacles to even faster growth, the business daily Aripaev reported.  Total sales by companies that are members of the Estonian Association of Construction Materials Producers in the first half of this year came to 3.7 billion kroons (EUR 236 mln), a 30 percent increase over the same period a year ago. 
The CEO of Kunda Nordic Cement, Eino Tapio Aura, said the cement producer was working at full capacity. Sixty-five percent of its output is sold on the domestic market.  "We have to curb export in order to meet demand on the home market," Aura said. The company has invested 200 million kroons in enlargement. 
An investment of 250 million kroons in Estonia and Latvia is being planned by Tartu Maja Betoontooted (Tartu Maja Concrete Products). The company also is gearing up for an investment in Lithuania. 
The deputy CEO of Tartu Maja Betoontooted, Jaan Luts, said high demand on both the domestic and external markets, as well as a price rise, were all pushing up sales.  "In the second half of this year demand will remain higher than we are able to supply. Shortage of raw materials may become an important obstacle," he said.

Despite active expansion, producers of construction materials are unable to meet demand, Aripaev said.  Estonia`s largest construction company Merko Ehitus, which released its half-year reults on Friday, said in its comments to the report that rapid increase in volumes highlighted the unsatisfactory situation prevailing in the workforce and material supply sector, which boosted the ongoing increase in construction prices even further. 
"Limited supply of workforce and the quick price increases are currently the main factors clouding the market`s development prospects. Rapidly changing environment hinders planning and increases the risk of extraordinary costs significantly. The continuously increasing construction prices, whose rate of increase currently exceeds the rate of increase in the consumer price index," may decrease demand in the long run, Merko said.