Foundation Starting to Bear Load Again: Signs of Recovery Emerging in the Construction Materials Sector
Finland and Sweden's construction material market show signs of recovery from the bottom, which also improves the prospects for Estonian construction material producers. The biggest challenge is increasing competitiveness.
Swedbank's annual large-scale industrial survey reveals that this year, construction material producers forecast an average production volume growth of 6% and sales revenue growth of an average of 5%. "The past couple of years have been difficult for construction material producers due to declining construction volumes, but this year's Swedbank industrial survey results show that companies have their feet firmly on the ground and are moderately optimistic about the future. It seems the foundation is starting to hold again," noted Gerli Puusild, Swedbank's construction materials producer sector head.
Sales and production volume growth is emerging
57% of entrepreneurs forecast increased sales revenue, and 69% are counting on increased production volume. On average, sales revenue growth of 5% is projected, whereas last year entrepreneurs were much more cautious and estimated sales revenue growth at 1%. "Construction material producers have a moderately positive outlook for the coming year," said Marina Vaganova, executive director of the Estonian Construction Materials Producers Association. "After a difficult and unstable period, we can see the first signs of production volume recovery and sales growth. We expect stable development, which is being boosted by the revival of the domestic market and the gradual recovery of orders from our neighboring countries. Although growth may not be rapid, we believe the direction is clearly upward."
Finland and Sweden are recovering
As the three main target markets, entrepreneurs highlight Finland, Latvia, and Sweden. "Swedbank data shows that the decline in construction permits in Finland has stopped, and in Sweden, the issuance of permits has begun to increase, but we should not expect a sharp jump," said Puusild. "In our view, the stabilization of markets in Finland and Sweden is an important sign that demand is turning more positive. These markets are of significant importance to Estonian producers, and we already see growing interest and activity that gives us confidence to look to the future with more hope," added Vaganova. Nearly every third company plans to enter new markets, and 29% consider the USA as a new market as well. "If tariffs were to rise or market access become more difficult, this could affect both raw material prices and our export opportunities. Particularly vulnerable are those products whose manufacturing depends on energy- or metal-intensive inputs. For this reason, companies must be flexible, diversify supply chains, and look for opportunities to lock in prices for longer periods to ensure stability even in a difficult international environment," noted Vaganova.
Ensuring competitive costs is a challenge
For entrepreneurs, the biggest concern is ensuring competitive costs – this was highlighted by 83% of entrepreneurs. The next risk factor is retaining and recruiting key employees, estimated by 48% of entrepreneurs. The average wage growth for the sector was projected at 3%. According to 13% of companies, the number of employees will increase, and according to 83%, it will remain at the same level. The sector mainly lacks machine operators – 52% of companies assessed this (39% in 2024), and the main recruitment challenge is the lack of necessary qualifications and skills among candidates. Over 40% of companies are automated and digitalized, but investment in automation and digitalization has decreased. According to the survey, companies are directing a quarter of their total investment volume to automation and digitalization, whereas last year this figure was 36%. "The number of companies with digitalized and automated work processes has grown year over year, but investment confidence is low and large-scale investments are not being undertaken," acknowledged Puusild. The investment volume in the sector decreases by 3% compared to last year. However, this year's investments have one and only one goal – increasing efficiency.
Swedbank's industrial survey, conducted for the 14th time, is the most comprehensive sector survey in Estonia. The survey involved 212 Estonian industrial companies, of which 23 are from the construction materials industry.
