Sales volumes for ready-mixed concrete in Great Britain rose by 9.8% in the first quarter compared to the previous three months, with mortar sales up by 6%, primary aggregates (crushed rock, sand & 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 particularly useful at times of heightened industry uncertainty. The latest results provide the first indication that the downturn may have bottomed out, although it should be read in the context of broader economic weaknesses that remain.
Asphalt producers, for instance, have highlighted the difficulties that local authorities face in reconciling 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 highlighted in the MPA survey. Mortar sales volumes, primarily linked to the early stages of new housing projects, saw a 6% rebound in 2023Q1. Some of this 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. Housing demand cooled significantly following Government's mini-Budget in September 2022, with interest rates rising sharply, housebuyers' sentiment waning, and their financial situation deteriorating. 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.
Meanwhile, progress on major infrastructure projects – including HS2, Hinkley Point C and work in the regulated sectors – continues to underpin demand for bulk aggregates and support sales of ready-mixed concrete. The forward pipeline includes a variety of opportunities for the mineral products industry. Still, there are also significant risks to deliverability, given the major cost challenges for infrastructure projects. 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.
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 construction areas.
Looking to the horizon, Aurelie Delannoy, MPA 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.
"Producers of mineral products continue to face the immensely difficult task of balancing the short-term 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 Government to recognise and address the challenges faced by the producers – not just focusing on a narrow list of so-called 'critical' minerals as it has done so far – but for 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 daily, is crippled by an ineffective planning regime, falling replenishment rates, rising taxes and constant Government U-turns on its construction pipeline. It is time for a much-needed strategic re-think before these challenges have a wider detrimental impact on our ability to deliver sustainable growth."
MPA 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 Government's policy objectives for construction, housebuilding, infrastructure and decarbonisation in the coming decades.
