Editor's Note
This editor’s note highlights the key facts and market implications behind “For Construction Materials, 2024 is the Year of “, with emphasis on sourcing, product fit, fabrication, logistics, or buyer impact.
On Tuesday, December 10, 2024, during a press conference, Alain Plantier, the president of UNICEM (National Union of Quarrying and Construction Materials Industries), took stock of the construction materials activity over the last 10 months and presented the outlook for 2025. The year 2024 has been marked by the continuation and intensification of the real estate crisis in a turbulent political context. While construction figures and new home sales have hit new lows, dragging down all upstream and downstream sectors of the industry, some more positive signals suggest a shift in trends. But the exit from the crisis is expected to be long and gradual: materials activity could, at best, stabilize for aggregates, and could still decline for ready-mix concrete (BPE). In this context, the aggregates and ready-mix concrete sector recorded a significant contraction in its activity in 2024, pulling production volumes down to historic lows (estimated at 304 million tonnes for aggregates and 33 million cubic meters for BPE).
2024: The Year of “Historic Lows” in Activity Volume
The plunge in residential construction has dragged down construction materials in its wake. Activity, measured by our indicator, is expected to record a decline of approximately -8% in volume this year after a drop of nearly -10% in 2023. However, the better orientation of the public works sector has helped limit the decline for some materials, while those exclusively intended for the residential sector are recording sharp contractions. Like the other trends described previously, the materials indicator has been recovering for a few months, although activity remains down -5% compared to a year ago (and is about 16% below its 2021 level).
The good performance of activity and order books in the public works sector has indeed helped limit the extent of the deterioration for some materials, notably aggregates, although the latter did not benefit from the same support as during previous electoral cycles. In fact, the nature of public works sites in 2023 and 2024 ultimately proved to be more "demanding" of BPE than aggregates, mainly concentrated in civil engineering segments.
To this must be added the now much more virtuous approach to resources, which leads our professionals to favor a circular economy approach by reusing materials. In this context, the demand for materials has fallen significantly in 2024, on the order of -12% for BPE and -4% for aggregates.
Very Constrained Recovery Capacity for 2025
The drop in interest rates coupled with a more proactive loan supply policy from banks has allowed households to reconnect with credit: in fact, production over the last three months (September to November) increased by +37% for purchases in new construction. However, future price drops should not be counted on to improve real estate purchasing power in 2025: the scope for decreases is indeed strongly limited, both on the consumer price side (whose increase could remain around +1.5% next year) and on the side of new home prices, which have only fallen slightly and are already rising again in the third quarter of 2024. Several parameters maintain high price levels, including: – the scarcity of land; – construction costs;
– the multiplication of technical standards; – And, finally, the drying up of the supply of new developments. Under these conditions, the capacity for a rebound in the real estate market, and then in construction, should remain limited in 2025. After falling by nearly 137,000 units in two years, housing starts could recover timidly in the second half of the year (i.e., +10,000 units in 2025, according to our estimates). This sluggishness will weigh on the demand for BPE. The public works economic climate, however, should continue to fuel materials activity in the segment of major operators, whose activity would remain on an upward trend. On the other hand, uncertainties weigh on investment by local authorities, which represent 42% of the works.
Source: Read the original article | Published: December 16, 2024