Heavy goods vehicle transportation faces an array of higher fees, and this is noticeably pushing up the price of delivered building materials, says Attila Juhász, in a statement. Transport companies are forced to pass on the increase in costs to their pricing. Photo: Shutterstock

The hike in the excise tax on fuels is causing an average price increase of over 40 forints per liter for diesel fuel, which plays a significant role in freight transport. The implementation of a carbon dioxide surcharge has also led to an increase in road tolls. For heavy-duty trucks commonly used in the delivery of building materials (J4 and J5 category), there's an additional 20-50 percent price hike per kilometer. Certain categories, particularly smaller two and three axle trucks, have seen road toll fees more than double on main roads.

A STRING OF CUTS HITS TRADERS HARD

Juhász believes that the inclusion of numerous new toll segments, totaling 130 kilometers, is also a significant setback for traders. Though it might not seem substantial, the affected roads include the M0 ring road around Budapest, which is a vital arterial route in freight transport.

"Budapest and its metropolitan area are traditionally overrepresented in the Hungarian construction industry as this region generates about a third of the domestic building material trade market, prompting many players to establish premises near the M0 ring road. The significance of the M0 is further increased by the radial structure of Hungary's high-speed road network, since it accommodates almost the entire east-west traffic," explains the chairman.

Modeling the market situation from the perspective of a building material trader in the Budapest metropolitan area, Juhász concludes that the collective impact of the toll increase, new toll sections becoming chargeable, and the excise tax hike will result in an average 2 percent additional price increase on building materials delivered to construction sites starting from January.

BUILDING MATERIALS FACE A MULTI-STEP DELIVERY PROCESS

The model also takes into account that building materials typically make not one, but two journeys; first, they travel in bulk from the manufacturer to the trader's premises, often from abroad, covering hundreds of kilometers within the country. From there, they are delivered to construction sites in smaller lots and over shorter distances as per schedule. According to Juhász, producers and traders must pass on the rise in freight fees as last year's decline in demand, which led to a typical 30 percent drop in turnover, has made their financial situation so difficult that they cannot afford any further losses.

Calculations indicate that the freight charges from producer to end-user have increased by an average of 16 percent overall in the first month of 2024 due to these changes.

WIDE VARIATION IN THE AVERAGE 2 PERCENT PRICE INCREASE

The integration of increased costs into prices results in an average 2 percent additional uplift across all delivered building materials. "This is an average figure; the actual increase can vary significantly by product. The final price is heavily influenced by the product's value, weight, and volume. The more valuable the product, the smaller the impact of shipping costs on the final price, and vice versa. For bulkier products like paving stones, masonry materials, and roof tiles, which form the backbone of the turnover, freight charges can represent a weight of 15-20 percent in the consumer prices, leading to a greater price increase," Juhász points out.

He further emphasizes that the 2 percent price increase will be added to the anticipated rise in building material prices in 2024. Traders believe that most subsequent price hikes may occur in the first quarter of the year, as an increasing number of suppliers notify their commercial partners of their intentions to raise prices by 5-10 percent.