Dwindling demand for heavy materials raises red flag

Demand for heavy materials such as steel, bricks and timber has continued to fall in response to the slowdown in the new-build sector, according to the latest sector analysis.

In the last quarter of 2022, a fifth of heavy-side manufacturers reported that sales of construction products dipped, marking a second consecutive quarter of decline.

In contrast, 27 per cent of light-side manufacturers recorded a rise in product sales, extending a run of growth to 10 straight quarters.

The Construction Products Association, which carried out the research, said the findings highlighted the weakness of the new-build sector and other areas driven by consumer and business confidence, in comparison with the buoyancy of commercial refurbishment and energy-efficiency retrofit work.

Demand was viewed as the key constraint on manufacturers’ activity going forward, the body found.

On balance, a third of heavy-side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months, with two-thirds citing demand as their key concern, it said.

On the light side, a balance of 8 per cent of firms expected a rise in sales during 2023.

Rebecca Larkin, head of construction research at the association, said the analysis reflected mixed fortunes for manufacturers.

“It was a mixed bag for construction product manufacturers at the end of last year, with demand in some areas of construction knocked by renewed economic uncertainty following the Truss government’s mini-Budget, as well as early signs that historically high inflation was stalling household spending and business investment decisions,” she said.

“This primarily affected heavy-side manufacturers, who experienced a fall in sales for products that are typically used at the earlier stages of construction as demand and confidence weakened for new-build project starts.

“Sales growth continued for light-side manufacturers in Q4, however, and is likely to have been buoyed by areas of construction that are still experiencing strong activity, namely office refurbishments and energy-efficient retrofit such as insulation measures.”

The findings came as the Mineral Products Association (MPA), which represents producers of aggregates, asphalt and concrete, reported a third consecutive quarter of declining demand for heavy-side materials in the face of supply-chain bottlenecks, intensifying cost pressures and fear of economic recession.

At the end of 2022, sales volumes of primary aggregates – crushed rock and sand and gravel – had fallen by 8.2 per cent on the previous year, while asphalt fell by 6.5 per cent and ready-mixed concrete by 3.8 per cent.

Excluding the pandemic-hit year of 2020, these were the fastest rates of decline recorded since 2012 for aggregates and asphalt, and the second fastest for ready-mixed concrete, the association said.

By contrast, demand for mortar – which is driven by housebuilding activity – was the only area of growth recorded in 2022, with sales volumes up 3.5 per cent on the previous year.

MPA economist Luke George said weakness in the market for heavy-side materials should be seen as a red flag for the outlook of the sector as a whole.

“Materials such as aggregates and ready-mixed concrete are ubiquitous to construction and typically used early in a project’s timeline,” he said.

“Less demand for these materials suggests that a slowdown in construction activity is already well underway, despite current construction output remaining elevated.”