New numbers from the Mineral Products Association (MPA) show that demand for materials like aggregates, concrete, asphalt and mortar remain at the historically high levels seen last year.
This reflects firm construction demand at the start of 2022 despite the bad weather that hit parts of Great Britain during February, the association said. There has also been some easing in reported supply chain constraints, including for HGV drivers, which has helped sales.
Asphalt sales volumes in Great Britain rose by 1.0% in the first quarter of 2022 compared to the previous quarter; sand & gravel sales were up 2.1% by volume, ready-mixed concrete by 3.2% and mortar by 5.5%. Only crushed rock volumes saw a marginal decline on a quarterly basis (down 0.4%).
Asphalt volumes hit their highest peak since 2008 last year and there continues to be pent-up demand from delayed road projects due to the pandemic, in addition to demand stemming from National Highway鈥檚 Road Investment Strategy (RIS2) and an increase in demand from local authorities鈥� repair and maintenance work. The bulk of the logistical and haulage issues reported by asphalt producers last year appear to have eased, but the cost of labour, energy and raw materials including bitumen, are all escalating. The big concern is the impact this may have on planned National Highways schemes and already stretched-out local authorities鈥� repair and maintenance budgets, MPA said.
Ready-mixed concrete sales were hit hard during the onset of the pandemic in 2020, and in the year to March 2022 were still 6% below the pre-pandemic (2019) levels. London and the southeast, which makes up just over 30% of the total share of volumes across Great Britain, have endured a sustained period of weakness that can be traced back to a comparatively slow recovery in commercial construction projects. Overall demand is nonetheless supported by major infrastructure projects, including HS2 and Hinckley Point C, as well as a healthy pipeline of industrial warehouse projects.
Mortar sales have been driven by a pick-up in new housing starts since last summer. On a quarterly basis, mortar sales reversed the two back-to-back quarterly declines in the second half of 2021, with a 5.5% increase in Q1 2022. Sales volumes returned to their highest level since Q3 2019. However, while 2022 has begun strongly, the uncertainties facing housebuilding have increased amid rising costs of materials and labour and wider macroeconomic conditions.
In the aggregates market, crushed rock sales remain comfortably above the pre-pandemic level, benefiting from demand from highways schemes and the manufacture of asphalt, and as fill materials on major infrastructure projects. Sand & gravel sales have been more muted, albeit this is linked to weaknesses in some areas of ready-mixed concrete demand.
MPA sales volumes in GB: change on the previous period (seasonally adjusted)
| 听 | Asphalt | Ready-mixed concrete* | Crushed rock | Sand & Gravel | Mortar |
|---|---|---|---|---|---|
| 2019 | -0.8% | -3.9% | -0.7% | -5.4% | -2.3% |
| 2020 | -8.6% | -18.2% | -9.6% | -12.4% | -23.5% |
| 2021 | 12.5% | 14.1% | 16.7% | 13.3% | 24.4% |
| 听 | 听 | 听 | 听 | 听 | 听 |
| 2021 Q2 | 4.5% | 1.2% | -0.9% | 0.9% | 21.2% |
| 2021 Q3 | -4.2% | -6.4% | -4.6% | -10.4% | -3.8% |
| 2021 Q4 | -0.3% | 5.5% | 3.2% | 4.5% | -0.7% |
| 2022 Q1 | 1.0% | 3.2% | -0.4% | 2.1% | 5.5% |
| 听 | 听 | 听 | 听 | 听 | 听 |
| 4 quarters to 2022 Q1 vs. 2019 | 2.9% | -5.9% | 4.8% | -1.7% | -0.1% |
* Ready-mixed concrete sales volumes at GB level cover sales from both fixed and site (mobile) plants. Source: MPA, ONS.
MPA director of economic affairs Aurelie Delannoy said that the bulk of the momentum in mineral products demand recorded at the start of the year should carry over into the second quarter, but things could start to get tougher from the summer and into next year.
鈥淐urrent construction activity levels and mineral products demand remain high,鈥� she said. 鈥淭he short-term pipeline is also robust. However, with material cost inflation running at 25% on an annual basis in April, the supply environment is a challenge. There are concerns over the impact of passing these costs onto customers and the commercial viability of future projects.鈥�
She continued: 鈥淲e expect that large infrastructure projects will continue to drive further growth in demand but this cannot be at the expense of the 鈥榖read and butter鈥� activity level fuelled by the private sector, particularly consumer-facing private new housing, private housing repair and maintenance and commercial retail sectors. Construction forecasters have already reduced their growth expectations for this year and there are signs that the pressures are continuing to pile up. This means that mineral products companies are facing a tough combination of rising costs, dwindling growth prospects and international uncertainties.
鈥淐onfidence to invest in future capacity to deliver on government鈥檚 increased infrastructure and housing ambitions relies on better delivery of planned projects than has been evident in recent years. Meanwhile, two energy intensive mineral products industries - cement and lime 鈥� have been excluded from government鈥檚 compensation scheme for climate change costs on the basis of technicalities. Clearly, a more consistent and strategic approach to government鈥檚 objectives and policy delivery is still lacking.鈥�
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