Latest MPA survey results provide first indication that downturn may have bottomed out
PRODUCERS of heavy-side building materials, including mineral products such as aggregates, asphalt and concrete, recorded a much-welcomed and broad-based rebound in demand in the first three months (Q1) of 2023.
Sales volumes for ready-mixed concrete in Great Britain rose by 9.8% in the first quarter compared with the previous three months, with mortar sales up by 6.0%, primary aggregates (crushed rock, sand and gravel) by 3.3% and asphalt by 1.8%.
This comes 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.
This MPA survey is seen as a ‘bellwether’ indicator of construction trends, reporting on market activity in heavy-side building materials, and providing insight that is seen as particularly useful at times of heightened industry uncertainty.
The latest results provide the first indication that the downturn may have bottomed out, although the MPA says they should be read in the context of broader economic weaknesses that still remain.
Asphalt producers, for instance, 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 the first quarter of 2023 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.
House building is another area of concern highlighted in the MPA survey. Mortar sales volumes, which are primarily linked to the early stages of new housing projects, saw a 6% rebound in the first quarter of 2023. Some of this includes a catch-up from December, when weather disruptions brought sites to an early pause before Christmas.
However, the first quarter of 2023 was still the second-worst performing quarter in the past two years, with volumes down 8.7% over the past six months. Housing demand cooled significantly following the Government’s mini-Budget in September 2022, with interest rates rising sharply, house-buyers’ sentiment waning and their financial situation deteriorating.
The latest mortar data suggest that housing output will slow further over the next few months, evidencing house builders’ continuing focus on finishing existing builds, rather than starting new ones.
Meanwhile, progress on major infrastructure projects – including HS2, Hinkley Point C and work in the regulated sectors – continues to underpin demand for bulk aggregates as well as supporting sales of ready-mixed concrete. 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.
The MPA says 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.
As the Association points out, mineral products are the backbone of any construction project, forming the foundations and structures for roads, railways, housing, commercial and industrial developments. Despite a good first-quarter sales outturn, 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 will have on all major areas of construction.
Looking to the horizon, Aurelie Delannoy, the MPA’s director of economic affairs, said mineral products were ‘key enablers’ of much longer-term policy objectives, including securing energy supply, achieving the energy transition and delivering climate neutrality.
She said: ‘Producers of mineral products continue to face the immensely difficult task of balancing the short- and long-term outlooks – 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.
‘It is time for the Government to recognize and address the challenges faced by the producers – not just focus a narrow list of so-called ‘critical’ minerals, as it has done so far, 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 1 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. 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,’ said Ms Delannoy.
The MPA has recently also published an update to its Annual Mineral Planning Survey (AMPS 2022), evidencing 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 the Government’s policy objectives for construction, house building, infrastructure and decarbonization in the coming decades.