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01 August 2018

Demand for Construction-Related Mineral Products Sees Strong Recovery in 2018Q2 Following Snow Disruption

Construction market demand for mineral products rebounded in 2018Q2 from a very poor first quarter of the year, when activity had been affected by the cumulative effect of exceptionally bad weather and the collapse of the construction company, Carillion.

After accounting for typical seasonal variations, sales volumes for aggregates and ready-mixed concrete saw an increase by 9.2% and 9.8% respectively in 2018Q2 compared to the previous quarter, and by 11.3% for asphalt. Materials such as aggregates and ready-mixed concrete are used across all types of construction work, primarily earlier in project timelines. The recovery in sales volumes for these materials is a clear indication that general construction activity also rebounded from the slow start of the year.

Any growth in construction work remains, however, heavily skewed towards housing. Mortar sales, which also saw a bad weather blip in 2018Q1, recovered strongly in 2018Q2, up 20.9%, underpinned by continued momentum in housebuilding, where this material is primarily used. The MPA quarterly sales survey shows that the volume of mortar sold in 2018Q2 was the highest quarterly total since our records began in 2004. Meanwhile, sales volumes for every other material monitored remain well below their pre-recession peak in 2007.

While the improvement in construction market demand in 2018Q2 was very welcome, the underlying longer-term trends remain subdued. Sales volumes for all materials except mortar were lower in the first half of 2018 compared to the same period last year, as well as on an annual basis. In the year to June 2018, sales volumes of aggregates were 1.7% lower than the previous year, 3.1% lower for asphalt, and 5.4% lower for ready-mixed concrete. By contrast, mortar sales volumes grew by 12.7% over the same period. The longer-term weakening in mineral products markets suggests construction activity outside housebuilding remains subdued.

Regional disparities also show interesting patterns. Sales volumes for asphalt in the first half of 2018 point to positive road activity in the South East and South West. This was offset by declines in the West Midlands, the northern regions of England, and most particularly in Scotland, where some large transport projects came to an end last year.    Ready-mixed concrete sales by contrast were weaker across all regions of Great Britain compared with the first half of 2017. The biggest decline took place in London, which had seen very strong post-recession growth, and most likely reflects a slowdown in commercial office building.

Aurelie Delannoy, Director of Economic Affairs at MPA, commented:
"We welcome the recovery in sales volumes in the second quarter, but the outlook for this year has not changed and remains subdued. Sales volumes weakened in the past year, in line with general construction work. Outside housebuilding, there are limited sources of growth. Major infrastructure investments such as High Speed 2, Hinkley Point C and Highways England's road programme should provide a boost, most noticeably from 2019 onwards, if momentum is sustained."

"There is little doubt that the heightened level of economic and political uncertainty is having an adverse impact on private investment, notably in some areas of construction such as commercial office building. This is not helped by continuing uncertainty about the delivery of infrastructure projects and related timings. The construction supply-chain, including mineral products, is key to the delivery of government policy on housing and infrastructure but is in a very challenging situation when it comes to planning for future work and investment. The potential 'No Deal' Brexit would further threaten construction investment. In such a scenario, the mineral products industry and other sectors in the construction supply chain would become early victims of the economic fallout. As such, the negotiating parties need to maintain focus on economic realities to avoid such an outcome."

MPA sales volumes in GB, summary table

2018Q1
Asphalt
RMC (1)
Crushed rock
Sand & Gravel
Mortar
Q on same Q prev. Year
4.6%
1.0%
7.9%
0.3%
24.0%
Year to date
-1.7%
-6.0%
0.2%
-4.4%
14.0%
Annual rolling average
-3.1%
-5.4%
-0.6%
-3.8%
12.7%
Q on prev. Q (seasonally adjusted)
11.3%
9.8%
12.2%
3.0%
20.9%

% Change on previous period (seasonally adjusted)

2018Q1
Asphalt
RMC (1)
Crushed rock
Sand & Gravel
Mortar
Construction Output
2016
3.5%
4.0%
5.3%
1.9%
4.6%
4.1%
2017
0.2%
-2.6%
0.5%
-1.8%
10.6%
7.1%
2017Q3
-2.8%
-1.8%
-1.0%
-1.5%
1.6%
0.4%
2017Q4
1.2%
1.4%
1.0%
5.8%
5.8%
0.3%
2018Q1
-4.5%
-7.6%
-3.6%
-6.5%
-3.7%
-0.8%
2018Q2
11.3%
9.8%
12.2%
3.0%
20.9%
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(1) RMC is the sum of sales from both fixed & site plants.

Seasonally adjusted MPA sales volumes in GB (million tonnes or cubic metres)

Ends.

   
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