The effects of the war in Ukraine, the Swedish Transport Administration is following the situation together with our suppliers.
Russia's invasion of Ukraine and new lockdowns due to the coronavirus are affecting the Swedish Transport Administration and the construction industry. Cost increases and longer and uncertain material lead times are having an impact on our deliveries.
What does the current situation look like?
Long lead times are an unfortunate reality in some areas. The global supply situation was already under pressure as a result of the pandemic. The war in Ukraine has further affected the situation, as have new lockdowns due to the coronavirus. Prior to the war, rail transport traversed Russia and Belarus, but this is no longer an alternative and we are currently estimating that the transport of containers from China to Sweden will take three to four months.
“We are seeing significant increases in the cost of materials and fuel in our projects. We are yet to have a complete picture of what this will mean, but we are monitoring developments and continuously analysing how it affects our operations in the short and long term”, says Julia Axelsson, Head of Procurement at the Swedish Transport Administration.
The Swedish Transport Administration is holding regular discussions with our suppliers to assess the situation. We are also following the development within the Swedish Transport Administration to see how we can manage and reduce the impact.
Close cooperation is important
“This is why close cooperation with our suppliers is important. We depend on them to carry out our infrastructure projects. Therefore, we need to know how increased costs affect both existing and future contracts and identify what we can do,” continues Julia. “It is in our interest to be an attractive business partner and to do our best to find solutions that benefit both us and our suppliers, within the scope of what is permitted.”
A step in this direction was taken in April when the Director-General of the Swedish Transport Administration decided to regulate fuel costs in existing contracts with no specific regulation in place. This means that, due to the war, suppliers will be paid for increased fuel costs in 2022. Now we are also looking at how we can handle any claims that may be made for increased costs of other materials as well.
Securing material supply
Increased infrastructure investments in Sweden and Europe mean an increased demand for materials. Therefore, the Swedish Transport Administration encourages all suppliers to plan their orders in advance.
“Good advance planning is the key when there is a risk of material shortages, both of technically approved material for railway projects and of materials purchased by our contractors”, says Julia Axelsson. “This is beyond our control and made more difficult by the fact that no one knows how long the war and lockdowns due to the coronavirus pandemic will last. However, we are also working to find alternative technical solutions, if needed, to secure deliveries for our maintenance contracts and investment measures.
It is unknown how the war and increased costs will affect us in the long term or how it will affect our projects in the short and long term. “We do not know the extent of the impact yet, we will have to monitor things to see how the increased costs will affect us overall. We will continue to report to the department on any developments we observe”, concludes Julia.