Paata Trapaidze, the founder of Caucasus Road Project (CRP) declares that they could calculate the price of construction materials before the Ukraine-Russia War,while the situation has drastically changed since the start of the war and prices are by 30-35% in the last two months.
“We did not have good expectations about prices in the last two years, despite the fact that inflation was accelerated. We had the problem of raising wages, or labor costs for the last two years. Otherwise, the price of cement would not have risen so much, in 2020 the price of oil products, on the contrary, even they would be down, but in 2021 they have started to increase. Overall, inflation did not have significant effect on infrastructure companies. There was pressure on wages, although the share of salaries in large infrastructure projects is up to 15%, and its 20% increase means a 2-3% growth in total costs.
Infrastructure companies work on small margins because of the electronic tenders. So, we have quite small margins, that is 5-7% and this margin will withstand such small changes.
However, the results are worst from February 24. First, the price of Brent is USD 119, the expectation is that by the end of the year it will rise to USD 200.
Along with fuel, the price of cement and rebar will inevitably increas due to the national currency exchange rates. In other words, in these two months, prices have already increased by 30-35%. No business could imagine this. If futures tell us that the price of oil will be $ 200 by the end of the year, it means that the price of steel and cement will rise even more," Paata Trapaidze said.
