Hanson Cement Comment: Q4 2019

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

Seasonally-adjusted demand for mineral products in Q4 2019 was mixed, reports the Mineral Products Association (MPA). Compared with Q3 2019, there was a slight increase in aggregate sales, while concrete and asphalt remained flat. Mortar sales fell -8.6%.

Overall demand for mineral products was lower in 2019 than 2018. The MPA reports year-on-year ready mixed concrete sales down -3.9%, as are aggregates -2.2%, mortar -1.7% and asphalt -0.8%. The ready mixed concrete market has reduced in size for the last three years, with falling demand in London and the South East being the biggest contributing factor.

The Construction Products Association is forecasting a slight decline in overall construction activity (-0.3%) in 2020. The slight growth they are forecasting in 2021 relies heavily on the government’s infrastructure plans for road, rail and energy being on time and at the projected scale.

Based on the above, it’s unlikely we’ll see building materials manufacturers investing heavily in capacity until we see an uplift in construction activity. But if major construction projects suddenly move up the pipeline, we could start to see pinch points in certain materials and products. HS2, for example, would certainly have an impact on certain types of aggregate availability along the route of the line. UK cement producers have historically run at capacity and rely on imports to balance demand so, again, we could see pinch points in certain areas.

Environmental issues are also going to change the way products are manufactured and supplied in the future. Many end users and merchants are looking at ways they can reduce single-use plastic in the supply chain. Pressure is also coming from government through new legislation on extended producer responsibility and a potential plastics tax. Packaging recovery note (PRN) costs for plastic also rose significantly throughout 2019 due to low recycling rates and hence an insufficient supply of PRNs. We have seen the demand for cement in plastic packaging continually rise over the last 10 years. But we believe now this will start to decline, as there are other solutions available which use far less plastic and give the required protection.

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