Expert: Construction Material Prices May Start Falling

According to Madis Varend, the supply chain manager of Puumarket, the Baltic region's largest timber retail chain, the major price increases in building materials are over and some product prices may even start to decline.

According to Madis Varend, building material prices rose faster than other goods in the first half of the year, which was mainly caused by the Iran conflict – a combination of disrupted logistics and supply chains and rising energy prices. "Manufacturers have been under significant price pressure due to raw material and transportation costs, which has also increased the cost price of products," explained Varend.

"The production of many building materials such as concrete, steel, as well as OSB boards and foam plastics is energy-intensive, and the first half of the year's oil price rally forced many manufacturers to raise prices by 5-10%. However, there is now hope that the price increase will stabilize and some products may even see price declines because oil prices are lower and Estonia's building material prices also depend directly on whether the USA and Iran can reach a peace agreement, which could further reduce costs," said Varend.

"There is still much uncertainty – the stabilization or possible decline of building material prices depends very directly on keeping the Strait of Hormuz open and maintaining a delicate peace agreement between the USA, Iran, and Israel," emphasized Varend.

"For some building materials, we have already received the first positive signals from manufacturers. For example, OSB board prices, which are widely used in construction, rose significantly in spring, but by now the price level has stabilized and the previous upward price pressure has somewhat eased. Regarding further price declines, it is still too early to draw firm conclusions, but from the perspective of the fourth quarter, such an opportunity has emerged. We have also received a fresh positive signal regarding commonly used polyurethane insulation boards, where the manufacturer has announced a slight price reduction starting in September," explained Varend.

"Behind these trends is some stabilization of the situation, a drop in fuel prices, and increased supply in European markets – in France, the major Swiss Krono factory partially restarted its OSB production line, and at the same time US demand has fallen. Delivery times have also shortened, which points to market stabilization," said Varend.

"Another common building material whose price could decline is foam plastic board, which increased 30-40% from the beginning of the year due to the rise in oil prices. This is a high-volume product that is not kept in large reserve quantities and old-price batches sell out quickly," added Varend.

"Greater impact on building material prices is to be expected rather in mid-autumn, which depends on the recovery of supply chains. In any case, further price increases in the coming months are not particularly expected, and building material prices should at least stabilize at the current level initially," said Varend.