Hanson Cement Comment: Q1 2022

This year has started well for the cement and aggregate industries, with strong quarterly volume sales despite January and February construction output being hampered by bad weather.

The latest Mineral Products Association (MPA) figures show that an easing in the supply chain issues which dogged 2021 and firm customer demand boosted sales in Q1, with ready-mixed concrete sales up 3.2% compared to Q4 2021. Mortar (+5.5%), sand and gravel (+2.1%) and asphalt (+1.0%) were also up.

Overall, we are seeing a return to normal sales and trading patterns. Some sectors continue to perform strongly, such as housebuilding and infrastructure. The booming RMI market has dropped off, as householders choose holidays over home improvements and discretionary spend on DIY purchases falls in line with pre-Covid levels.

Further from home, the invasion of Ukraine has had a knock-on effect on the cement and aggregates industry. Russia is a major timber exporter so the supply of wood for pallets and paper bags is being adversely affected. Even plastic bags are made using oil. The major impact though has been on the cost of energy.

Escalating fuel costs disproportionately affect energy intensive industries like ours. Earlier this year, one Spanish cement company shut several kilns because it couldn’t afford to operate them. Extra energy costs can’t be absorbed by manufacturers; price rises are inevitable.

The Ukraine conflict has highlighted our reliance on fossil fuels and the importance of seeking alternatives. Hanson has a sustainability plan which will see us making progress towards having the UK’s first zero carbon cement plant as part of our commitment to becoming a net zero company by 2050. This will require switching to non-fossil fuels such as hydrogen, as well as capturing carbon from the manufacturing process and devising less-carbon intensive concrete mixes.

But it’s not all doom and gloom. We expect the robust pipeline of large-scale construction projects to keep sales buoyant throughout Q2, while possible threats to growth are mainly human-related, namely shortages of HGV drivers, cement plant workers and skilled construction workers.

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