Much-welcomed rebound for sales of heavy-side building materials

Producers of heavy-side building materials, including mineral products such as aggregates, asphalt and concrete, saw a much welcomed and broad-based rebound in demand in the first three months of 2023.

The latest MPA survey, which many view as a ‘bellwether’ indicator of construction activity suggests the downturn in the construction industry “may have bottomed out” despite broader economic weaknesses which still remain.

The survey said work on major infrastructure projects like HS2 and Hinkley Point C continued to underpin demand for bulk aggregates, as well as supporting sales for ready-mixed concrete, which rose by 9.8% in the first quarter compared to the previous three months.

Mortar sales were also up by 6.0%, while primary aggregates (crushed rock, sand & gravel) by saw a 3.3% sales increase and asphalt sales rose by 1.8%. 

These figures come after a near year-long decline in demand for these materials, according to the Mineral Products Association (MPA) industry sales survey, which provides time series sales volume data stretching back over 20 years.

However, despite a good first-quarter sales outturn, the MPA says the short-term outlook for these markets remains challenging, after factoring in the expected negative impact that cost inflation, heightened economic uncertainty, and weak household and business confidence, which it believes will have on all major areas of construction.

Aurelie Delannoy, MPA Director of Economic Affairs, said producers of mineral products continued to face the immensely difficult task of managing costs, subdued demand and heightened project delivery risks in the short term, against the need to invest and secure long-term supplies to deliver on these objectives.

As he stated mineral products were 'key enablers” of much longer-term policy objectives, including securing energy supply, achieving the energy transition and delivering climate neutrality, he called on the government to “recognise and address the challenges faced by the producers”.

He added this should not just focus on a narrow list of so-called ‘critical’ minerals, but “all essential minerals and the manufactured products derived from them that underpin economic activity”.

“The wider minerals sector, which is responsible for producing over one million tonnes of raw materials and products every day, is crippled by an ineffective planning regime, falling replenishment rates, rising taxes and constant Government U-turns on its own construction pipeline,” he said. 

“It is time for a much needed strategic re-think, before these challenges start having a wider detrimental impact on our ability to deliver sustainable growth.”

The latest MPA survey states Asphalt producers have highlighted the difficulties that local authorities face in trying to reconcile fast rising costs with fixed budgets, forcing them to scale back road improvement and maintenance plans. 

Major road projects overseen by National Highways are also heavily impacted by costs, planning delays and changes in Government priorities. 

As a result, the 5.2 million tonnes of asphalt sold in 2023Q1, remains well below the equivalent quarterly average across 2021 and 2022 (5.6 million tonnes). 

Sales volumes for asphalt have fallen by 4.9% in the past six months alone, with reductions widespread across most regions of Great Britain.

Housebuilding is another area of concern. 

Mortar sales volumes, which are primarily linked to the early stages of new housing projects, saw a 6% rebound in 2023Q1, some of which includes a catch-up from December, when weather disruptions brought sites to an early pause before Christmas. 

However, 2023Q1 was still the second-worst performing quarter in the past two years, with volumes down 8.7% over the past six months. 

This is in line with the latest PMI survey, which showed extended delays on new housing starts continued in April, as a result of elevated mortgage rates and weak demand.

The MPA says the latest mortar data suggests that housing output will slow further over the next few months, evidencing housebuilders’ continuing focus on finishing existing builds, rather than starting new ones.

The survey adds the forward pipeline includes a variety of opportunities for the mineral products industry, but there are also significant risks to deliverability, given the major costs challenges that remain for infrastructure projects. 

It states the government’s decision at the Spring Budget in March to freeze public spending capital budgets in cash terms does little to address concerns over which part of the pipeline is commercially and financially achievable.

The MPA’s Annual Mineral Planning Survey (AMPS 2022), evidenced the pressures on the permitted minerals reserve-base for construction aggregates, and published a document setting out a series of steps required for Smart Regulation to enable the industry to support and deliver Government's policy objectives for construction, housebuilding, infrastructure and decarbonisation in the coming decades.