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August 18, 2022
The impacts of a conflict between two states rarely stay within them. In the current era, where countries are affiliated and interrelated via a complicated web of supply chains and trade dependencies, international conflicts adversely affect the whole world in one way or the other. In this regard, global supply chains and the international economy. According to Forbes, the recent dispute between Ukraine and Russia has introduced new tension to the global supply chains, as if they were not already fragile and bad enough.
As if post-pandemic inflation was not enough of a test on the public, the rising tensions between the two nuclear states have taken inflation to a whole new level. If you think developing countries bear the biggest impact, then you should look at Europe. Apparently, Ukraine is known as Europe’s ‘breadbasket’ because it is the leading supplier of wheat and sunflower to not only Europe but the world. As a result, European food chains will be greatly impacted by this conflict.
Accordingly, Canada is not immune to the blows of this conflict. Slowly, the adverse effects are seeping into the Canadian supply chain as well. David-Alexandre Brassard, CPA Canada’s chief economist, makes it blunt and clear that the war will negatively impact the Canadian economy. According to Business Standard, 50% of Canadian businesses are already suffering due to the dispute. Besides the energy, food, and transport industries, the construction industry (both global and Canadian) will also face severe consequences as a result of the conflict.
As reputed construction contractors, we believe it is our duty to inform our clients and the public about the potential issues we might face. Thus, this blog post will explore the impacts of the Ukraine-Russia conflict on the Canadian construction industry.
With Ukraine being one of the largest exporters and transporters of iron, aluminum, steel, and lumber, the prevailing circumstances make it hard for construction companies to source their materials from this hub. Considering the future uncertainties and the rising tensions between the two states, we can’t see a glimpse of hope in the shape of a viable solution anywhere in the near future.
From commercial steel frame buildings to post-frame homes, the essence of the aforementioned raw materials in the Canadian construction industry can not be emphasized enough. As a result of the conflict, we, unfortunately, see a prolonged shortage of raw materials in the future, which will definitely result in price increases.
In economics, a material shortage is always accompanied by a concurrent rise in prices. This is the most fundamental rule of demand and supply – when a material’s supply diminishes, its price automatically rises. The latter, combined with the ever-increasing material demand, will push material prices to a whole new level.
Unlike Europe, which sources 30% of its oil and 35% of natural gas from Russia, Canada is not heavily reliant on Russia for fuel. However, that does not mean Canada will be immune to rising oil and, ultimately, gas prices. Whether we like it or not, Ukraine’s worsening condition and the global sanctions on Russia will indirectly affect energy prices in Canada.
As an industry heavily reliant on fuel, construction will face severe challenges. From transportation of materials to operating cranes and other machinery, things will become rough.
Like its other allies, Canada has also imposed various sanctions on Russia following its invasion of Ukraine. Clearly, this will not go unnoticed by Russian hackers. Consequently, Canadian construction companies currently face a higher threat of cybersecurity and related attacks.
Given the uncertainties, companies have had to inevitably rethink their delivery routes, which have ultimately pushed construction expenses even higher. Increased route complexities resulting in increased fuel consumption are not good news at all. Customers must expect further rises in project prices.
Besides the financial implications, the uncertainties have also caused delays in all major and minor construction projects. Material price hikes coupled with shortages have overwhelmed both companies and their clients. As a result, construction site delays have become inevitable.
Construction companies that heavily rely on Russia face severe reputational challenges. Others are clearly unable to deal with the price hikes and the resulting pressure. Consequently, many construction firms might not be able to withstand the circumstances and may temporarily or permanently halt operations. This will, to some extent, strain the economy.
As Alberta’s most reputed construction contractors, we are working tirelessly to minimize the impacts of the conflict as much as possible. We seek to keep our prices reasonable and within reach through negotiation and reliance on local materials.
We are a diverse building company specializing in post, stud, and steel frame buildings. We are proud to serve customers in the commercial, agricultural, and residential sectors and help turn their dreams into reality. Learn more about Premium Built Structures and our unique services.
Contact us now for more information.