Construction market demand for crushed rock, sand & gravel, asphalt and ready-mixed concrete (RMC) has been weak since the start of the year, the Mineral Products Association (MPA) confirms. Following two consecutive quarters of deteriorating markets, sales volumes of aggregates in the first half of 2019 stood 1.9% lower compared to the same period in 2018, 0.3% lower for RMC and 1.1% lower for asphalt. Only mortar sales, closely linked to house-building, increased – up 1.4% in the first half of the year compared to last year.
The fall in sales volumes over the past six months echo official construction data from the Office for National Statistics and other business surveys, which show construction output has flattened in recent months.
The MPA says that poor sales volumes for these heavy building materials provide physical evidence of the current weakness in construction, as well as an early indication of further weakening to come. Aggregates and RMC are used in all areas of construction, from house-building to new commercial offices and retail, roads, infrastructure projects, as well as general repair and maintenance. Mortar is used predominantly in house-building, while asphalt is closely linked to roadworks. These heavy building materials are mostly used early in a construction project timeline and are not usually stockpiled for future use. As such, their sales volumes provide an accurate snapshot of current market conditions. A fall in sales indicates that the level of new construction work is falling and that the lack of projects in their early stages will continue to dampen construction activity in the coming months.
As has been the case for the past two years, the decline in RMC sales continues to stem from lower demand in London, the MPA said, where both house-building and commercial construction is slowing. Sales volumes of RMC in the capital are now 19% below their recent peak in the summer of 2016.
The decline in asphalt sales this year has disappointed suppliers who were expecting an upturn after the Treasury last year announced an extra £420m for local road and bridge maintenance in England to be made available in the financial year 2018/19. Government has stated that this additional funding was indeed distributed to local government, but evidence suggests that at least some of the funding was used to pay for existing work, rather than any additional road maintenance. On national roads, Highways England has a strong pipeline of work over the next two years but is not getting on with it. Current delays fuel industry scepticism about imminent delivery, the MPA said.
Even though the MPA results for the first half of 2019 show growth in mortar sales volumes compared the same period in 2018, they have now declined for four consecutive quarters. The MPA suggests that this indicates ‘a general hiatus in house-building’.
MPA director of economic affairs Aurelie Delannoy said: “The fall in mineral products markets is the most palpable evidence of the general health of the construction industry; growth has all but stopped, and both construction and heavy side building materials markets are starting to show signs of contraction.
“Ensuring the timely delivery of major infrastructure projects such as HS2 is vital for the success of the construction industry and its supply chain over the coming years. At a time when both housebuilding and the construction of retail and office buildings are slowing, infrastructure projects are increasingly becoming the primary source for growth for the industry. Ideally, these projects, many of which are planned to start only well into the 2020s, should be accelerated to boost confidence and general economic activity, whilst delivering on the productivity improvements necessary to secure sustainable long-term growth.”