The invasion of Ukraine and its effects on the Swedish construction sector - A mixed method analysis of the impacts of the War in Ukraine on Swedish firms and material costs

Abstract

This is a bachelor dissertation in economic geography at Gothenburg University, studying the Swedish construction sector and the potential disruption the war in Ukraine has cause the sector. The purpose of the study is to find out how the shock in global value chains has affected prices in goods used in construction, primarily residential construction, but also how firms experienced the initial trade shock and if they have continued trading with Russian partners or if they have reallocated their input sourcing. The study is conducted using secondary data from statistic databases made for the construction sector by SCB and an interview study with relevant professionals in purchasing or executive roles in top 10 firms in Sweden. Prices saw a price hike immediately after the war in Ukraine started and continued to rise throughout 2022, prices stabilized in 2023 with an average price increase of 15.5% across all studied material compared to January 2022. Steel and iron was particularly affected by price increases and peaked at 42% higher prices in may 2022 compared to January the same year. Some firms in the sector complained about trade disruption and explained that there was trouble finding materials while others were less affected. All interview subjects stated that all trade with Russian partners stopped after the invasion and some said that they are very vigilant in not souring anything from Russia. A majority of firms stated that it is hard to get new projects due to not finding an equilibrium in prices with their clients.Even though the sector is suffering from general inflation and higher interest rates in Sweden, disruption in global trade (and the subsequent price increases in material) has been a factor in the slowing of construction pace and firms has since the war worked on improving their supply chains, reallocating inputs from Russia to other countries