Hanson Cement Comment: Q1 2020

Andrew Simpson, Packed Products Director Hanson Cement is BMBI’s Expert for Cement & Aggregates.

Demand for mineral products declined in the first quarter of 2020. Adverse weather in February and the COVID-19 outbreak at the end of March contributed to the decline. The decrease in March was unprecedented with mineral product manufacturers reporting volumes 80 to 90% lower than current run rates. Many manufacturers furloughed staff and closed operations in line with demand from end users. Some construction sites stayed open as in other countries which were a few weeks ahead of the UK. Government guidelines for our sector were unclear, causing added disruption as manufacturers and merchants sought guidance on what basis their businesses could operate.

Firms who remained open had to set up safe working practices for operational roles and home working for key office functions within days of lockdown. It’s amazing how firms have adapted to operate in very difficult circumstances. Utilising Wi-Fi and video conferencing, home working productivity has increased with less travel and more focus on key areas. Meetings are shorter and more productive with clear agendas and outcomes.

April was a month of scenario planning based on current run rates, market intelligence and analysis of other countries. More merchants are re-opening branches following further Government guidelines, but it will be a concern if safe working cuts capacity and restricts supply as demand recovers.

Some housebuilders are reopening, others are only finishing houses they started pre-COVID-19. If volumes do not return to normal operating levels in 2020, companies will cut fixed costs and planned investments could be postponed to 2021.

The future is very unclear, but it will be different from the past. For instance, commercial visits and face-to-face meetings will be limited until 2021. Employees, companies, and customers will need to adapt to a new way of trading, in a sector that is not at the forefront of technology. It will be interesting to see how this develops and what solutions companies come up with.

While growth will be constrained by the need to contain the virus, construction has demonstrated its resilience. The recent Government announcement endorses the value our sector contributes to the UK economy and was a positive message for many businesses.

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