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Dwindling demand for heavy materials raises red flag

Demand for heavy supplies comparable to metal, bricks and timber has continued to fall in response to the slowdown within the new-build sector, in response to the newest sector evaluation.

Within the final quarter of 2022, a fifth of heavy-side producers reported that gross sales of building merchandise dipped, marking a second consecutive quarter of decline.

In distinction, 27 per cent of light-side producers recorded an increase in product gross sales, extending a run of development to 10 straight quarters.

The Development Merchandise Affiliation, which carried out the analysis, mentioned the findings highlighted the weak spot of the new-build sector and different areas pushed by client and enterprise confidence, compared with the buoyancy of economic refurbishment and energy-efficiency retrofit work.

Demand was considered as the important thing constraint on producers’ exercise going ahead, the physique discovered.

On stability, a 3rd of heavy-side corporations, whose merchandise are inclined to feed into the sooner phases of building, anticipated a lower in gross sales over the following 12 months, with two-thirds citing demand as their key concern, it mentioned.

On the sunshine facet, a stability of 8 per cent of corporations anticipated an increase in gross sales throughout 2023.

Rebecca Larkin, head of building analysis on the affiliation, mentioned the evaluation mirrored combined fortunes for producers.

“It was a combined bag for building product producers on the finish of final 12 months, with demand in some areas of building knocked by renewed financial uncertainty following the Truss authorities’s mini-Funds, in addition to early indicators that traditionally excessive inflation was stalling family spending and enterprise funding choices,” she mentioned.

“This primarily affected heavy-side producers, who skilled a fall in gross sales for merchandise which might be sometimes used on the earlier phases of building as demand and confidence weakened for new-build challenge begins.

“Gross sales development continued for light-side producers in This autumn, nonetheless, and is prone to have been buoyed by areas of building which might be nonetheless experiencing sturdy exercise, specifically workplace refurbishments and energy-efficient retrofit comparable to insulation measures.”

The findings got here because the Mineral Merchandise Affiliation (MPA), which represents producers of aggregates, asphalt and concrete, reported a 3rd consecutive quarter of declining demand for heavy-side supplies within the face of supply-chain bottlenecks, intensifying value pressures and worry of financial recession.

On the finish of 2022, gross sales volumes of main aggregates – crushed rock and sand and gravel – had fallen by 8.2 per cent on the earlier 12 months, whereas asphalt fell by 6.5 per cent and ready-mixed concrete by 3.8 per cent.

Excluding the pandemic-hit 12 months of 2020, these have been the quickest charges of decline recorded since 2012 for aggregates and asphalt, and the second quickest for ready-mixed concrete, the affiliation mentioned.

Against this, demand for mortar – which is pushed by housebuilding exercise – was the one space of development recorded in 2022, with gross sales volumes up 3.5 per cent on the earlier 12 months.

MPA economist Luke George mentioned weak spot available in the market for heavy-side supplies must be seen as a purple flag for the outlook of the sector as a complete.

“Supplies comparable to aggregates and ready-mixed concrete are ubiquitous to building and sometimes used early in a challenge’s timeline,” he mentioned.

“Much less demand for these supplies suggests {that a} slowdown in building exercise is already nicely underway, regardless of present building output remaining elevated.”