Construction Industry 2022 Panel Discussion

Construction Industry 2022 Conference: Rising Material Prices and Supply Chain Security

Source: Portfolio, April 26, 2022

This morning, Milán Palkovics, Chairman of the Board of ÉPDUFERR Nyrt., participated in a panel discussion at the Construction Industry 2022 Conference, where the topics were raw material prices and supply chain security.

Constant Price Increases Causing Tensions

Price fluctuations are causing significant tension between partners in the construction industry. Dr. Csilla Rázsóné Szórády, CEO of újHÁZ Centrum, illustrated the situation:

“Previously, one or two price increases per year were typical, but now we are relieved if price changes occur only once a month.”

The discussion, moderated by Gábor Kiss, CEO of Metrodom Kivitelező Kft., also addressed the possibility of passing price increases onto clients and market expectations for the year ahead.

Challenges in Pricing and Project Costs

Tamás Gegesi Kiss, CEO of Gépész Centrál Kft., explained that a few years ago, the biggest concern was who would do the work and how much labor would cost, but now the focus is on material prices.

“It seems like there’s always a new challenge, but one thing remains constant: we are always fighting against uncertainty.”

He pointed out that weekly price adjustments make it difficult for contractors and developers to plan ahead. However, some developers—especially those who can increase sales prices—are in a position to absorb some pricing risks to ensure timely and high-quality project completion.

“It would help if everyone recognized this extraordinary situation and understood that absorbing some extra costs benefits them as well,” he concluded.

Industry Performance and Price Trends

László Máté, CEO of Lasselsberger Hungária Kft., shared that 2021 was a strong year for them, with over 5% growth. While 2022 started positively, the last two months saw a slowdown.

He noted that while demand surged in 2019, the market contracted in 2020, and 2021 followed a recovery trend. Their company operates with annual contracts and has not changed prices mid-year.

• In 2021, prices remained unchanged in Budapest and only increased at the rate of inflation in rural areas.

• In 2022, the average price increase was 3.5%, but rising energy costs have required additional monthly charges—still below 10%.

Looking ahead, Máté said the industry’s overall performance depends on projects like Paks II and government incentives. However,

“The sector is likely to close the year with a slight decline, unable to reach last year’s volumes.”

Regarding the windfall tax introduced in 2021, he stated that it affected only a few companies, but regulated prices were below production costs, making operations unviable. As a solution, some companies shifted towards vertical integration to remain profitable.

Steel Trade: Price Spikes and Market Instability

Milán Palkovics, Chairman of ÉPDUFERR Nyrt., described the first four months of 2022 as “anarchy” in the steel trade, with soaring prices.

“Prices are now decreasing, but it’s unclear whether they will return to previous levels.”

He shared an example where a manufacturer agreed on a price for an order, but after signing the contract, they raised costs by 20%, illustrating the volatile market conditions.

Palkovics also noted that decision-making processes have become much longer, sometimes extending by several months. To address price volatility, ÉPDUFERR is promoting risk-sharing, encouraging clients to absorb some of the price increases rather than placing the entire burden on contractors.

“Fortunately, we have clients willing to cooperate.”

Supply Chain Disruptions and Shortages

Several panelists highlighted supply chain constraints as a major issue. Dr. Csilla Rázsóné Szórády explained that wall materials, roofing tiles, and wood paneling are among the most problematic products due to limited production capacities.

She emphasized that government programs and panic-driven stockpiling have driven demand to extreme levels.

“The entire supply chain is maxing out its capacity.”

Previously, companies could rely on imports, but due to the war, many countries are prioritizing their domestic markets, making international supply uncertain.

“Such extreme price increases mean that clients are opting for cheaper alternatives—simply because budgets have an upper limit,” she concluded.