The construction industry warns that rising costs will affect the EU recovery plan

European construction executives warned that “dangerous” price increases and shortages of many construction materials could undermine the EU’s 800 billion euro flagship economic stimulus plan.

The EU construction industry accounts for nearly 10% of the EU’s economic output, and huge infrastructure projects account for a large part of the Brussels Recovery Fund, which will allocate grants and loans to the EU. Rebuilding the economies of member countries After the Covid-19 pandemic.

But as the economic rebound in Europe and other regions (including the United States and China) has triggered a construction boom, the prices of construction materials ranging from steel and wood to concrete and copper have begun to rise sharply in recent weeks.

According to data from the Federation of European Construction Industry (FIEC), the price of asphalt has risen by 15% in just three months, the price of cement has risen by 10% in one month, and the price of wood has risen by more than 20%.

Public infrastructure projects usually penalize builders for construction delays, and contractors often have to bear the cost of unexpected price increases.

FIEC Director-General Domenico Campogrande (Domenico Campogrande) warned that price increases and additional delays could dilute the impact of EU funds.

“The danger is that we have this huge EU recovery plan, but if 30% to 40% of these funds are absorbed in additional financial instruments to pay higher prices, it will be a real nonsense, because it will not enter The real economy,” he said.

in The most recent letter The FIEC told the European Commission that it has “warned” against price increases and material shortages, including that the price of steel used to make reinforced concrete in Italy more than doubled in the four months to March.

“This phenomenon is endangering the contribution of the construction industry to economic recovery and threatening the potential impact of the European recovery plan,” it said.

In Italy-the biggest beneficiary of Brussels’ stimulus funds-the government plans to use more than 100 billion euros of EU funds to build new infrastructure in the next five years. But the construction industry warned officials that it will be difficult to meet the challenge without major reforms.

Flavio Monosilio, research director of the Italian construction company association ANCE, said: “We are facing a shortage of many basic building materials, which is very dangerous, because Italy has been hit harder than the rest of Europe. “This crisis is at the core of the EU’s new recovery plan.”

Construction industry executives blamed several factors for the bottleneck, including a sharp rebound in demand that exceeded Material supply In many countries, as well as supply chain disruptions and ongoing trade tensions associated with the pandemic.

Some materials are also affected by other issues, such as bark beetles infesting wood production and delays in the redistribution of unused steel.

Thomas Birtel, chief executive of the Austrian construction group Strabag, stated that prices had “increased substantially in the past two weeks” and the company had to “report delays on individual construction sites because the materials were no longer available at all”.

Strabag built the Copenhagen Metro in Denmark and the Limerick Tunnel in Ireland, and operated its own concrete and asphalt plants, but Birtel said: “Construction is a small-scale business, and it is impossible to control the supply chain materials for all buildings. ”

In Germany, 44% of construction companies surveyed by the Ifo Institute in May reported problems with timely procurement of materials, up from less than 6% in March.

“Since 1991, we have never seen such a bottleneck,” said Felix Leiss of Ifo. “This obviously caused a slowdown in construction activity in April, at least temporarily.”

Production in the German construction industry fell 4.3% month-on-month in April, although companies in the industry reported that the backlog of orders in March reached a record 62 billion euros.

“Many manufacturers cannot supply these materials before the end of the year. This is a real problem,” said Stephan Rabe of the German Construction Industry Association. “A lot of money is used for public and private sector construction projects in the United States and China, which is absorbing a lot of materials. Timber is produced in Germany and exported to the United States, so the supply here exceeds demand.”

Some German politicians have called on Berlin to seek temporary EU export restrictions on timber and other materials.

As the U.S. government prepares to launch 1.7 tons Program infrastructure The global economy is expected to rebound speed up, It is expected that the pressure will remain high in the coming months.

“It will take time to get back to normal-at least by the end of this year,” Campogrande said.

Some countries, such as France and Germany, have responded by relaxing regulations on some public sector construction contracts, waiving delay fees, and compensating contractors for unforeseen price increases.

Monosilio said that Rome has not yet provided any relief to the industry, which has been hit by a decade of decline in public infrastructure investment, lack of bank funds, and long delays in project approvals and payments.

Italian Prime Minister Mario Draghi once said that “the destiny of a country” depends on the success of a country. 248 billion euro package The investment and reforms of the European Union are mainly funded by the European Union’s recovery and recovery plan. It includes investments in high-speed train lines, renewable energy facilities, smart grids and energy-efficient buildings.

European Union countries have a poor record in allocating funds; in the six years to 2020, they spent an average of just over half of the funds allocated by Brussels.

Monosilio said that if reforms are not carried out to solve the problems of the Italian construction industry, similar problems may confuse the EU’s recovery spending efforts.

“The Draghi government absolutely wants to improve this situation,” he said. “[But] It is the sword of Damocles hanging over the entire European project. “

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