Walter Nelles, vice-general secretary of MIRO, Germany’s aggregates federation, says the German construction sector and national building materials production was robust in March and April as the COVID-19 pandemic took hold in much of Europe. However, construction and building materials worksite costs increased due to the need to change working practices in light of the coronavirus.
“Quarry site employees generally work alone in their day-to-day duties, so can adequately socially distance. Our members say that most German quarries have not cut their production and weren’t forced to do so, unlike companies operating in other business sectors,” explains Nelles. He adds: “I have seen first-hand that building works are continuing. I drive around 70 kilometres to and from my work office, and the highway works and many other construction projects that I pass are being carried out as usual.”
Quarry operators across Germany have also been among those receiving national government financial support since the start of the country’s COVID-19 lockdown. Nelles notes that the government’s multi-billion-euro support packages to help pay worker salaries and other business running costs mark the biggest German state funding for national commerce since the implementation of the country’s post-World War 2 recovery plan.
The latest available UEPG (European Aggregates Association) figures reveal that Germany produced an estimated 591 million tonnes of aggregates in 2017 – second in Europe only to Russia’s estimated 706 million tonnes produced the same year. In 2017, Germany had around 2,730 extraction sites and approximately 1,330 aggregates production companies.
Nelles says that MIRO did receive some reports that in the first few weeks after the March 2020 introduction of the German lockdown, quarry workers commuting from France or other surrounding countries to work in Germany’s area quarries were facing delays of up to two hours going to and from work due to the need to submit their employment papers for checks by border police. For those reasons, quarry workers gave up holidays to stay in Germany and be assured of work. “Poland only opened its borders in early June, and I heard about a couple of Polish workers at a German quarry not going home to Poland for four months as they were worried about not being able to return to their workplaces in Germany.”
Nelles says that while the German construction sector and national building materials production have remained healthy since the start of the national COVID-19 lockdown, a lack of relied-upon goods, products and materials due to pandemic-disrupted freight exports (and lack of foreign production} will increasingly become apparent and slow down construction output. This, in turn, will cut demand for aggregates. He adds: “No data has been produced as to the precise impact on aggregates demand in 2021. It’s still too early to tell.”
Partly as a result of the large-scale national government support for business, German GDP (gross domestic product) is forecast to fall by just 6.3% in the full-year 2020 compared to 2019 (forecast at years beginning: +1.8% for 2020). This is a significantly lower GDP decline than estimates for most other European countries. The German government expects GDP growth of 5.2 % in 2021. For the construction sector, growth is forecast to be just 1% in the full-year 2020, and 1.1% in 2021.
The latest research by the UEPG (European Aggregates Association) on the estimated percentage difference in individual European countries’ full-year 2020 aggregates production compared to 2019 shows Germany among Europe’s likely least COVID-19 pandemic-affected countries, with output down just 2.5%. Other minimally impacted countries are Denmark (-2%) and Hungary (-3%). The most affected countries, such as Italy, Spain, the UK and Greece, are set to see aggregates production dip by an estimated 30-40%.
In April this year and in response to the COVID-19 pandemic, German building materials giant HeidelbergCement agreed with the group’s works council and employee representatives to introduce short-time work for its Germany-based employees. Also, the supervisory board and the management board of HeidelbergCement decided to voluntarily waive 20% of their fixed salaries in the second quarter of 2020.
Speaking in April, Dr Dominik von Achten, CEO of HeidelbergCement, said: “In addition to the necessary cost savings, this is a clear sign of solidarity in the company, especially with our foreign subsidiaries. We all have to do our part to cope with the difficult situation around COVID-19 as best as possible. The aim is to extend this voluntary sign of solidarity to the next management level in the company.”
In March 2020, HeidelbergCement posted encouraging 4% revenue growth to €18.9 billion last year, with net debt significantly reduced by €1.2 billion to €7.1 billion.
At that time, the group said the fast spread of the coronavirus was making it impossible to assess its likely 2020 full-year trading performance.
The boards of the VDMA, Germany’s construction equipment & plant engineering association, took stock of the current status of the COVID-19 crisis during their annual meeting at the beginning of July. At the virtual conference table, the members stressed that the situation is tense, but not dramatic. The companies are still benefiting from good order backlogs from before the pandemic and expect stimuli from economic recovery packages. The annual forecast of a 10 to 30% decline in sales remains in place.
According to the latest VDMA figures, incoming orders of construction equipment manufacturers at production sites in Germany declined by 26% between January and May 2020, compared to the same period of last year. In the months of March to May, which were the most heavily affected by the COVID-19 crisis, incoming orders were 40% below the level of the previous year. As such, the industry primarily lived on order backlogs and sell-offs. One positive aspect is that projects were not cancelled, but rather delayed where this was necessary.
Further VDMA figures reveal that machinery sales in Germany from January to May fell by 8% and were thus relatively stable, especially compared to the rest of Europe. The European market collapsed by more than a quarter during the same period. The figure for the German market will deteriorate further for 2020 as a whole but is currently not anticipated to fall significantly further than the economic downturn that would have been expected without the COVID-19 crisis. It is important to remember that 2019 was another boom year and that a normal cyclical downturn would have been expected for the industry.
According to the latest VDMA COVID-19 survey, 31% of trade association members still believe that they will return to the sales level of 2019 by 2021. Another 47% estimate that this will be possible by 2022. Nobody believes that it will take longer than four years for the industry to recover.
Disruptions in the supply chain had already ceased to play a significant role in June, while 88% of survey respondents reported that the adverse effects were either minor or non-existent.
A similar trend is indicated by the CECE Business Climate Index, the most important early indicator of the European construction equipment industry. After manufacturers’ confidence initially collapsed all over Europe, there was a noticeable recovery in June, albeit far below the level of the beginning of the year. The optimism of a V-shaped recovery is being driven by economic stimulus programmes, from which the industry will benefit.
Companies are already addressing the challenges of the post-coronavirus era. One concern is the increasing competitive pressure: 80% of companies participating in the VDMA flash survey classify this trend as severe or noticeable. More than half see barriers to foreign trade and the fragmentation of the markets as a problem, while 49% see climate change and the associated transition to greener energies and decarbonisation as a difficult task. Only 39% view the switch to environmentally friendly transport as a challenge.
The VDMA says that future topics for the industry include digitalisation, the autonomous construction site, sustainability and progressive construction, as well as climate change and all of its facets. Furthermore, technology and connectivity on construction sites will increase, which will have an impact on existing professions – another challenge.
A global construction and quarrying equipment manufacturing heavyweight, the Windhagen, Germany-headquartered Wirtgen Group, part of the John Deere Group, includes among its companies the top-tier Kleemann crushing and screening plant and linked technology brand, and Benninghoven, the premium asphalt plant maker.
In an interview for the June 2020 issue of FORUM, the Wirtgen Group’s customer magazine, Group CEO Domenic G. Ruccolo talked about the impact of the COVID-19 pandemic on the company.
“Over the course of John Deere’s 183-year history, we have successfully overcome many challenges, including world wars, recessions, and natural disasters. Now we’re facing the challenge of COVID-19 like every other company and also like every person in the world. As a part of the strong, stable John Deere Group, here at the Wirtgen Group, we are doing our best every day to protect our employees and at the same time provide our customers with the best possible support. We are proceeding prudently but decisively. I’m firmly convinced that at the end of the pandemic, we’ll be able to say that we’ve come out of it stronger and have learned from it, as a company, but above all, as people.”
Asked about the key to coming out of a period of COVID-19-induced disruption successfully, Ruccolo said: “It’s important that companies adapt to the new situation as quickly as possible and accept this ‘new normal’ – but proceed in a structured and careful way. Companies that allow themselves to get bogged down by fear and inaction and think they can wait until the virus disappears will have a very hard time. The key now is to come up with solutions and look ahead. If certain workflows and processes can no longer be carried out, new ones need to be implemented. This is how development and progress generally work. We need to keep moving – and in this kind of situation, with even more momentum than usual.”
