Construction may fuel French growth

The French aggregates market in 2011 was better than its predecessor but forecasts for 2012 are more circumspect as Julie-Anne Ryan reports

France unsurprisingly houses one of the most important European construction markets. In 2010 the sector was worth €123 billion and employed 1.25 million people. Of that, aggregates accounted for more than €3.5 billion and employed nearly 14,500 people: the country’s total aggregates production was 365 million tonnes.

As final quarter and full-year results throughout the aggregates industry were being announced, it was clear that 2011 had been a better year than its predecessor, but forecasts for 2012 are more circumspect.

The French construction industry as a whole is girding its loins for an expected loss of 35,000 jobs in 2012, blaming the European economic crisis and government austerity measures. The inevitable knock-on effect will see similar job losses in the aggregates sector, and 725 Lafarge has already announced plans to reduce its French workforce by 90 as part of a global move.

FFB (5744 French Building Federation) head Didier Ridoret explained: “The Eurozone public debt crisis and budgetary readjustment policies have shattered the economic recovery movement that had brought... a bright spell to our markets.”

The federation expects overall activity in the construction sector to fall 1.9% in 2012, after forecast growth of 1.2% in 2011. New residential construction is expected to drop by 2.8%, new non-residential building is to fall by 1% and maintenance and renovation works are to drop 1.7%.

That ‘bright spot’ meant that the building materials sector in France did quite well at the end of 2011 and 1850 Unicem forecasts growth of between 7-8% for the full year.

Ready-mixed concrete increased by 10.3% year-on-year in the fourth quarter, and 10.7% over the whole year. In the last quarter, aggregate production rose 7.1% year-on-year. In December 2011, aggregate deliveries and ready-mixed concrete both rose 18% year-on-year, according to Unicem (The National Union of Industry Careers and Building Materials, the federation of almost all mining of minerals and manufacturers of various building materials).

Share of Recycled Aggregates

Number of Firms By Production Class

The improvements may have been down to the fact that the weather last year was much better than it had been in 2010, but over the full year the aggregates segment rose 4.1%.

But the outlook for 2012 is not so bright. France has lost its triple-A rating, which means that borrowing will be more expensive for private and public investors, and local authorities are also cutting investments.

Not everyone is downhearted, at least not publicly. The 1613 UNPG (the National Union of Aggregates Producers) sounds quietly optimistic.

“The main growth factors are the dynamic demand from publics works (approximately 75% of the aggregates consumption) and building (approximately 25% of the demand),” said Carol Deneuve, head of economic services.

“In the first case, the important works and local authority projects support the demand, and also the public finance: in the second case it’s the household investment in housing and commercial premises.

“Indeed, the effects of growth added to the demographic dynamic are increasingly important factors for the demand. In France, the effect of the demographic growth and the healthy housing market, where there is no stock but there are important needs and even shortages, are encouraging elements for aggregates’ demand.”

There are other issues facing the market. For example, the UNPG organised a colloquium in February about recycling aggregates. The union wants to encourage the recycling of aggregates and increase it from the current 6.3% to 13%, and is already strengthening its policies to promote recycling in French quarries. As the table below shows, there has been a steady increase in recycled products since 1991. Another of the UNPG’s goals is to work with collectives to conserve local supply and low prices, it has stated.

With 1,500 companies currently producing this large country’s aggregates, it is no surprise that there is a huge diversity in size and scope and in how each of them is weathering the economic storm that has hit the industry across the globe.

The top players are numerous, and include names such as 643 Cemex, 680 Holcim, 4511 GSM and 4616 Eurovia as well as the French building materials groups Lafarge and 684 Vicat.

Lafarge showed positive trends in the fourth quarter. Its aggregates and concrete division grew in France, as well as the UK, Central and Eastern Europe and in Canada, with solid prices overall and strong cost-cutting partially offsetting cost inflation.
Volumes sold in Western Europe were 18.4 million tonnes in 2011 versus 18.8 million tonnes in 2010, a decrease of 2%, but in France domestic sales were up 4%, driven by volume growth. Average prices were slightly down, mostly due to the mix of project work, though the country reaped the rewards of improved market conditions, mainly due to the residential segment and better weather than in 2010. Ready-mixed concrete sales in particular were 9% up in France.

But Lafarge has announced that it is axing 460 jobs as part of a reorganisation of its worldwide corporate division. It says that 90 of those job losses will be in France.

Vicat achieved a 12.5% rise in consolidated sales in 2011 to €2.27billion, according to new figures. The company had “robust” business growth in France, which contributed €939million to the total, up 12.9% compared to 2010.

Eurovia has begun work on its new asphalt road coating plant in Lexy, France. It will replace the company’s current factory in neighbouring Mont-Saint-Martin, and is expected to have an annual production rate of over 70,000tonnes.

Busy as it is, the aggregates industry is not a vast contributor to the French economy (sales of €3.6 billion and the employment of fewer than 15,000) but figures provided by Cemex state that in France aggregates are the most consumed natural resource after water.

Most French citizens would probably be surprised to learn that they each consume 20kg of aggregate per day, whether it is for building their homes, schools, hospitals, roads or railways.