Roundup: War in Ukraine and its impact on worldwide construction

By KHL StaffMarch 03, 2022

The world is watching as Ukraine battles for its freedom and autonomy against Russian invaders. The effects of the conflict will be felt far and wide, and the construction is no different.

In the following news feed we provide updates on the wider implications of the Russian invasion of Ukraine for the construction industry. The story is changing rapidly. 

Thursday, March 3

JCB pauses shipments to Russia

JCB has made the following statement on Russia: “JCB has paused all operations, including the export of machines and spare parts.”

Thursday, March 3

Comment on Russia’s construction equipment market

Chris Sleight, managing director of market research and forecasting company Off-Highway Research, offers this insight into the Russian equipment sector: “According to the Association of European Businesses, the Russian construction equipment market grew 48% last year to 21,375 units. This is based on data collected from all the major international suppliers selling equipment in Russia, along with several major domestic OEMs, and comprises earthmoving and road building equipment.

“Last year was the fifth consecutive year of growth for the Russian market, and the volume of machines sold was almost twice the average annual sales in the preceding seven years.

“The imposition of economic sanctions on Russia, particularly its debarment from international and banking and payment networks, is likely to see equipment sales plummet this year. Off-Highway Research estimates that only about a third of the equipment sold in Russia is manufactured domestically (although this is hard to gauge accurately, due to the large number of local manufacturers).

“We believe that even without specific sanctions against construction equipment or without manufacturers voluntarily suspending sales, shipments to Russia are likely to cease due to uncertainty over payment. We also note that the deteriorating economic situation in Russia is likely to lead to a sharp fall in demand for equipment.

“A significant proportion of domestically manufactured equipment in Russia is produced by international OEMs, which opened factories in the country in the 2000s and 2010s. No comment has yet been made by any of these manufacturers about the immediate future for their Russian operations in light of the international situation.”

Thursday, March 3

‘We can shoulder economic consequences’

Riccardo Viaggi, secretary general of CECE (the Committee for European Construction Equipment), said it is impossible to measure the economic consequences of Russia’s invasion of Ukraine at the moment, but insisted, “We can shoulder them.”

He was speaking at a CECE webinar, during which he admitted that “Russia is an important provider of materials and an important export market.”

In answer to a question about whether the war in Ukraine could impact the production of construction equipment, he said, “We know that these tragic events will have negative economic consequences… and the sanctions and political tensions will make business between Russia and Europe more difficult.” Yet, he stressed, this was not significant when measured against “the loss of lives and livelihoods” of those involved in the conflict.

He added, “We hope that the relevant but still modest forecasting tools we have will give us a hint of where the sentiment is going, we hope we’ll have a way to monitor that.”

Thursday, March 3

Germany accelerates alternatives to Russian natural gas

In the wake of Russia’s attack on the Ukraine, Germany has sped up plans to build its first liquified natural gas (LNG) shipping terminals to reduce the country’s dependence on Russian natural gas. Chancellor Olaf Scholz announced the plan during a special session of the German parliament called to discuss German policy in the wake of the invasion.

The possibility of building an LNG terminal at the port of Brunsbüttel on the mouth of the river Elbe was first raised in 2018, and a tender was launched in 2019. Germany depends heavily on Russian gas and the conflict is said to have accelerated the plans to build the LNG terminals as well as other energy projects, such as those involving renewable energy.

Wednesday, March 2

Aggreko to exit Russia

Power rental giant Aggreko is to sell its Eurasian business, which is mainly in Russia. Aggreko said on Tuesday it will operate the business independently from the rest of Aggreko until the sale is concluded. Revenues from the region were £64 million in 2020, representing around 5% of Aggreko’s total.

“Aggreko has a responsibility for its 500 exceptional employees in the region and will continue to support them until a transaction is complete”, said the company.

Wednesday, March 2

Skyjack parent company pledges support for Ukrainians

Linamar Corporation, parent company of Skyjack, has vowed to support the Ukrainian cause through donations and sponsorship of refugees.

In a statement to its employees, the Canadian company’s executive chairman and CEO, Linda Hasenfratz, said, “As we have all watched events unfolding around us in recent days globally, we can’t help but feel deep sorrow, concern, and apprehension over the situation in Ukraine.

“Linamar’s founder Frank Hasenfratz left Hungary in 1956 after having taken up arms against Russians occupying his country in the Hungarian Revolution. He was a freedom fighter and as such we can’t help but feel we need to support the freedom fighters in Ukraine.”

The company said it would do so in two ways. “First, Linamar will match any donation made by its employees in support of humanitarian efforts in Ukraine.”

In Canada the funds will be donated to the Canada Ukraine Foundation (CUF). The Canadian government has also pledged to match any donations made in Canada, meaning any money donated will be quadrupled before going to the cause.

“Secondly, we are working with CUF to put our hand up to sponsor refugees coming to Canada and work for Linamar. We are investigating how we might offer the same in other countries we operate in. Please join us in support of the Ukrainian freedom fighters.”

Wednesday, March 2

Dinolift ceases sales to Russia

Finland-based access equipment manufacturer Dinolift has said it will no longer sell its products or spare parts to Russia or Belarus, in response to Russia’s attack on the Ukraine.

Karin Nars, managing director of Dinolift, said, “This will of course have an impact on both Dinolift and its customers. But that is a small price to pay compared to the price that the Ukrainian people and the ordinary Russian people are paying because of this war. We hope for peace, but we fear that the situation will get much worse before it gets better.”

Dinolift has a dealer in the Ukraine, Technopodjem, based in Kharkiv, but has not heard from them since the beginning of the attacks. “Our thoughts are with them and we wish them all possible courage in this terrible situation.”

When asked how the situation would affect Dinolift’s day-to-day operations, Nars commented, “Ukrainian people are forced to focus on saving their lives, their country and their independency. They are standing up for democracy with an incredible courage. I think buying machines it not on anyone’s agenda in Ukraine right now.

“As for Russia, the war is making it very hard for companies and the people in Russia. Maybe that will be the beginning of a change in the country. Russians who have international contacts both within business and personally should be able to form an objective opinion of what is happening right now.”

Nars added that the company expects costs of components and lead times to rise as a result. “They will of course go up, as will other raw material prices. Supply-chain logistics will be even more difficult than they already were.

“It is hard to know the long-term consequences right now of this war, but as we know uncertainty is never good for business.”

Wednesday, March 2

Risk of Russian cyber attack ‘heightened’

A security expert has warned of a heightened risk to construction businesses of cyber attacks from Russia.

Mike Wills of data security firm CSS Assure, said there is a “significant risk that Russia may seek to create instability within western countries… as a means to distract focus and attention away from the situation in Ukraine and onto closer, acute problems at home.”

He listed utilities, water, transport, infrastructure and supply chains among the sectors at greatest risk of cyber attack, but said, “Critical national infrastructure should be relatively hardened to attacks and they will, more than ever, be at a heightened state of vigilance.”

Wednesday, March 2

Metso Outotec ceases deliveries to Russia

Construction equipment manufacturer Metso Outotec has temporarily ceased all deliveries to Russia. Metso is a major player in the mining and aggregates sectors and around 10% of its annual sales come from Russia. It does not have any production facilities in the country.

“While the mining industry is currently not directly targeted by the sanctions, sanctions against the banking sector and individuals as well as other restrictions may have an impact on Metso Outotec and our customers’ Russia related businesses,” said Metso.

“Due to the current unclear and changing sanction situation, Metso Outotec has temporarily ceased its deliveries to Russia.”

Tuesday, March 1

Riwal starts fundraising campaign

Netherlands-based rental company Riwal, which has operations throughout Europe including Poland, together with its parent company Prodelta, has started a fundraising campaign to support victims and refugees from the Ukraine.

In a LinkedIn post, the company said: “To help the Ukrainian people where we can, Riwal in Poland initiated a humanitarian fundraising campaign, a campaign that has the full support of both the entire Riwal organisation as their parent company, Prodelta. With this campaign we support PAH, the Polish Humanitarian Action. It is their mission to provide aid to people suffering from armed conflicts and natural disasters.

“In times like these, we as a company must take responsibility and do what we can to minimise the suffering of refugees. In Poland, refugees are cared for and provided with food, drink and basic medical needs. With this action we hope to motivate others to set up similar actions and to help the victims where possible.”

Tuesday, March 1

VDMA on the impact of sanctions

Germany’s engineering organization VDMA said economic sanctions will require a fundamental reassessment of economic and trade relations with Russia. VDMA Executive Director Thilo Brodtmann said: “The new supply bans on various goods to Russia affect large sections of the European mechanical and plant engineering industry.”

He added, “It is now necessary to analyze the sanction conditions and their effects in detail. Counter-sanctions are also possible from the Russian side, yet it remains right to impose tough sanctions on the aggression against Ukraine.”

Monday, February 28

Statement from Ukranian construction company Kyivmiskbud

Kiev-based Kyivmiskbud, one of the largest housebuilders and contractors in the country, posted the following statement on Saturday: “Kyiv is a city built by us. Since 1955, Kievmiskbud has been rebuilding the capital since the last war. And we are ready and will do it again. But the main thing for today is to defend our city and our country!

“From the first day, many of [our] employees are in the ranks of the territorial defense. Some patrol the city at night, some help the army as best they can, including financially... We are strong, we will stand!”

Monday, February 28 

Concerns over Turkey’s €18bn nuclear project

The future looks uncertain for Turkey’s Akkuyu nuclear power plant – being built by Russia.

Just one day before the invasion of Ukraine by Russian troops, Anastasia Zoteeva, chief executive officer of the plant, discussed the €18 billion project’s timeline with Turkey’s NTV news channel, saying the plan was to complete one of its four power units each year, between 2023 and 2026.

Russia’s state-owned nuclear energy company Rosatom has a 99.2% stake in the project.

Monday, February 28

Companies weigh up Russia involvement

Reuters has reported that BP, HSBC and the world’s biggest aircraft leasing firm AerCap are among the companies looking to exit Russia on Monday, following the invasion of Ukraine.

It reported that Norway’s sovereign wealth fund, the world’s largest, will divest its Russian assets, worth about $2.8 billion, while Australia’s sovereign wealth fund said it planned to wind down its exposure to Russian-listed companies.

The news agency added that shipping group Maersk said it was considering suspending all container bookings in and out of Russia, and two of the world’s largest logistics companies, U.S.-based United Parcel Service Inc and FedEx Corp, said they were halting deliveries to Russia and Ukraine.

Monday, February 28

Zeppelin offers evacuation to staff in Ukraine

Zeppelin Group, the Caterpillar dealer in Germany, Ukraine and parts of Western Russia, posted on linkedIn that it was “shocked and concerned by the current events in Ukraine. The highest priority at this time is the safety of more than 600 colleagues in Ukraine. Therefore, we have offered evacuation to all employees in the region and asked them to stay at home.”

Monday, February 28

Bangladesh nuclear power plant may be delayed

An example of the wider construction-related implications of the Ukraine crisis is provided by news reports that the Rooppur Nuclear Power Plant (RNPP) in Bangladesh could be delayed. The plant (which would be Bangladesh’s first) is to be built with Russian financial and technical support, with even the its uranium fuel coming from Russia. The country will also be involved with the nuclear waste management of the project.

Energy expert M Tamim told The New Nation newspaper on Sunday, “The ongoing war will not impact on the power plant immediately but the construction works of it may delay, if Russian economy becomes weak for prolonging the war.”

Construction of the first unit of the power plant is scheduled for next year, with the second unit due for completion in 2024.

Friday, February 25

FIEC voices support for Ukraine

Europe’s contractors association FIEC has voiced support for the Ukrainian construction industry and the nation. Thomas Bauer, FIEC President, said: “The development of the European Union has shown that countries with very different political and economic situations can prosper together and jointly overcome difficulties through dialogue and cooperation.

“We therefore wish to the Confederation of Builders of Ukraine (CBU), our Member Federation from Ukraine, and to the country, that this conflict can end as quickly as possible so that the people of Ukraine can live again peacefully and without fear. This will also be the moment to work on the reinforcement of the links between our organizations.”

FIEC’s director general Domenico Campogrande added that the conflict was taking place after two years of pandemic which had already put a lot of pressure on the industry “and after several months of significant increases in the prices of products and materials, as well as of energy, which directly affects the competitiveness of our companies.

“The situation will certainly further exacerbate these elements and constitute a serious obstacle to the implementation of the investments foreseen under the resilience and recovery plans.”

Friday, February 25

Impact on inflation and supply chains

In a briefing note published on Friday, Oxford Economics said the invasion had completely overshadowed the positive economic data coming out of the Euro area earlier in the week.

The economic consultant said there were risks for the industrial sector “which will continue to be put under enormous pressure, particularly in energy-intensive sectors. The imposition of strict sanctions by Western powers on Russia could make things even worse for the European industrial sector, as Russia is also a main producer and exporter of some key metals such as steel, aluminium or nickel, so any disruption to trade flows would cause further damage to already-stressed global supply chains.”

It added that the war will mean oil and gas prices will remain higher for longer and there will be an additional impact on food prices, given Russia’s role as a global exporter of grains and chemicals. It will push eurozone inflation higher than expected and lengthen the inflationary cycle.

Friday, February 25

Will hinder covid recovery, says IMF

Kristalina Georgieva, managing director of the International Monetary Fund (IMF) said the invasion was a matter of grave concern, first and foremost because of the human toll and suffering of ordinary people; “The conflict is also having a serious economic impact, which will worsen the longer it continues.

“This crisis comes at a delicate time, when the global economy is recovering from the ravages of the Covid-19 pandemic, and threatens to undo some of that progress.”

She added, “Beyond Ukraine, the repercussions of the conflict pose significant economic risks in the region and around the world. We are assessing the potential implications, including for the functioning of the financial system, commodity markets, and the direct impact on countries with economic ties to the region.”

Friday, February 25

Impact on oil and gas prices

According to Chris Sleight, managing director of industry consultant Off-Highway Research; “The major direct threat in Europe… is the impact on oil and gas prices.

“This could become a serious issue if sanctions against Russia are extended to oil and gas exports, as it will push prices up significantly in Europe.”

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