Hanson Cement comment: Q3 2018

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

The Mineral Products Association (MPA) reported that seasonally-adjusted demand for construction products weakened in quarter three across all markets. Asphalt saw the largest decline (by -4.6%), but mortar (-4%), aggregates (-2%) and ready-mixed concrete (-1.5%) were all down. The longer-term picture is that housebuilding and infrastructure projects continue to be strong while ready-mixed concrete volumes continued to decline due to the slowdown in commercial and other public work.

Construction output is expected to be flat in 2018 with modest growth forecast in 2019 and 2020. It is worth noting that these forecasts are based on having some form of agreed withdrawal process from the EU with a transitional period to December 2020.

The Chancellor’s autumn budget had some good news for the construction sector with increased spending levels and improvements to the planning process to address the housing crisis. Aggregate tax was frozen at £2 a tonne which saves the industry £11.3 million in 2019/20. One announcement that will affect the sector was the planned £16 a tonne carbon emissions tax should we have a no-deal Brexit. This tax affects all stationary installations that participate in the EU Emission Trading System (ETS) such as cement production plants. The tax could add a significant cost to producers and end users. Plastic packaging will also be taxed from 2022 if it contains less than 30% of recycled plastic.

It will be challenging for the industry to meet the government’s targets on new housing and planned infrastructure given the current cocktail of capacity constraints, skills shortages, material shortages and transport pressures. The challenge for transport is finding sufficient numbers of drivers and vehicles. These constraints are widely debated at industry forums and there is no quick fix for the issues we face. Offsite construction is seen as the answer to some of the current issues, but in reality it is difficult to see how this is going to be achieved given the investment needed in the current uncertainty.

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