European construction sector outlook

Since western Europe has been one of the regions most heavily-impacted by the COVID-19 pandemic, it is no surprise that the lockdown and general containment measures imposed to delay its spread continues to have a significant impact on the European construction sector. According to first estimates from Eurostat, the European Union’s statistical office, seasonally-adjusted production in the EU construction industry fell by 11.7 per cent MoM in April 2020.

This is a marginally better performance than the previous month, where production in construction fell by 13.6 per cent in the EU. However, overall production in construction for the region has fallen to the lowest level recorded since the start of the series in 1995, according to the statistical office.

On an annual basis, production in EU construction declined 24 per cent YoY in April 2020. The member states which saw the most significant fall were France (-60.6 per cent YoY), Belgium (-39 per cent YoY) and Spain (-32.6 per cent YoY).

Development of construction production for the EU-27 in Jan-Apr 2020. Source: Eurostat

Construction spending forecasts
Elsewhere, Euroconstruct has also revised its 2019 construction spending forecasts for the region with the effects of the pandemic taken into account. As such, it now sees an estimated contraction of 11.5 per cent in 2020, followed by a rebound of six per cent in 2021.

The updated forecasts have been the most severe for the UK (down to -33.4 per from an initial estimate of +1.4 per cent) and Spain (-15 per cent from +3.1 per cent).

Cement sector impacts
Going forward, the impact of COVID-19 on the European construction sector is already having a knock-on effect on downstream industries, with cement consumption wavering in the 1Q20 and expected to fall further in the 2Q20. 

France entered the crisis with an already weaker cement consumption, declining an estimated 0.5 per cent to 18.67Mt in 2019, according to CIC Market Solutions (France). The pandemic also hit the construction sector hard at first, with activity levels seriously depressed from the end of March throughout April. However, a recovery was evident in May, with 83 per cent of new building sites open, compared with 53 per cent at the start of the month. In addition, the construction spending forecast for the country has been revised to -11.1 per cent from +0.4 per cent previously, a less severe drop than some countries.

In 2019 HeidelbergCement reported that its plants in Germany recorded a slight rise in sales volumes, driven by the strong development of demand, primarily in residential construction, as well as by mild weather. In April 2020 the country was also one of the few to report an increase in production in construction (+0.9 per cent YoY). Finally,  Euroconstruct’s construction spending forecast for Germany was revised to a modest -2.4 per cent in 2020. All of this suggests that the country’s cement sector should remain one of the strongest in western Europe over the coming months.

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