Hanson Cement Comment: Q2 2019

Andrew Simpson, National Commercial Director Hanson Cement is BMBI’s Expert for Cement & Aggregates.

Market conditions have been mixed this year. Sales were strong in quarter one, helped by good weather. Quarter two was weaker because of political uncertainty and bad weather in June. The Mineral Products Association reports that volumes of concrete, aggregates and asphalt have now declined for two consecutive quarters. Mortar sales are positive, which is to be expected given the national focus on housing. The decline in commercial construction is offset by an increase in infrastructure and new housing.

The Construction Products Association (CPA) is forecasting that construction output will decline by 0.3% in the remainder of 2019. Due to concerns regarding the government’s record in delivering large infrastructure projects such as HS2, the CPA has also reduced its 2020 and 2021 construction forecasts.

The RMI (Repair Maintenance & Improvement) sector has performed well throughout most of 2019 although most merchants reported lower sales in June. Construction activity is down, however the RMI sector is less volatile because of its diverse market and broad customer base. Large companies and projects tend to react similarly to external events and economic forces, while the army of small builders, installers and tradesmen buying from builders’ merchants are by nature less synchronised.

Other than market performance, we face big challenges as an industry which question our ability to meet the government’s  new housing targets. There’s been much debate, but few answers, to the problem of labour and skills shortages, as well as the problem of reduced capacity, which was a direct consequence of the global recession ten years ago. Political uncertainty has led to a lack of confidence in the construction sector: Firms are reluctant to sign off capex for expansion until they’re sure they’ll get a return on their investment. It’s also hard to imagine that the government’s suggestion – that offsite construction holds the answer to skills shortages – will be achieved without significant investment. Many companies are reaching out to schools, colleges and universities – promoting our industry to address skills and capacity issues, particularly among small builders, and tradesmen. But it’s a very large gap to fill, and as a large proportion of the workforce comes up to retirement, the question of who replaces them is unanswered.

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