MPA: 2Q demand for mineral products declines
Construction market demand for mineral products was lower in 2Q17 compared with the previous quarter, providing evidence of a more general slowdown in construction activity in recent months, according to the latest data and commentary from the Mineral Products Association.
After three quarters of generally positive activity across MPA markets post the EU Referendum, demand for construction mineral products declined in 2Q17 compared to both the previous quarter and 2Q16. Sales of aggregates and ready-mix concrete fell by 5.1 and 5.3 per cent, respectively compared to 1Q17, the fastest quarterly rate of decline since 3Q13 for ready-mix and 2Q12 for aggregates. Asphalt sales fell by 2.4 per cent over the quarter, although overall results for the first half of the year remain 5.2 per cent up compared to the first half of 2016. Mortar sales, which had accelerated significantly post-referendum in line with housebuilding, also weakened in 2Q17, down 2.5 per cent compared to the previous quarter.
A slowdown in overall markets activity was expected this year, given current forecasts for softer economic and construction activity in the medium term. A big driver for construction activity and our markets going forward is expected to come from infrastructure, including Highway England's roads programme and the start of big projects such as Hinkley Point C and HS2. However, in roads for instance, anecdotal reports of continued delays in Highways England's renewals projects continue to hold back asphalt sales in England, whilst activity on Scottish roads is now winding down markedly.
Simultaneously, sales volumes of RMC in London have now declined for three consecutive quarters, suggesting the market may have peaked last year, although volumes remain at very high historic levels.
On an annual basis, and despite the weaker performance in 2Q17, sales volumes for the year finishing in June 2017 remained positive across all major MPA construction minerals, with asphalt up 4.8 per cent compared to the previous year, 2.9 per cent for aggregates volumes and 1.4 per cent for RMC. Mortar sales, the strongest market, grew by 8.4 per cent over the period.
Aurelie Delannoy, Chief Economist at MPA, commented, "The weakening of demand across all major construction mineral products markets provides evidence of a general slowdown in construction activity, which was also highlighted in other data sources. Mineral products producers find themselves facing something of a dilemma, with construction activity in housing and commercial building expected to slow down this year, whilst the big infrastructure projects are only expected to come to full capacity in 2018/19."
"Given the current macroeconomic and political uncertainties, it is of the utmost importance for business confidence that planned projects do not see any further delays, as this may have a detrimental impact on future industry investment and the supply chain."
