Construction materials: The war in Iran and climate hazards are hindering recovery

After four years of declining volumes, 2026 was expected to mark the beginning of a recovery in the construction materials sector. However, according to UNICEM, the economic consequences of the war in Iran, along with adverse weather conditions and heat waves, hampered this recovery in the first half of the year, despite a rebound in building permits and construction starts.

The expected improvement in the construction materials market did not materialize in the first half of 2026. The extension of the zero-interest loan (PTZ), housing support measures, the Jeanbrun scheme and the financing conditions offered by banks had nevertheless given hope for a restart of demand.

But despite the rebound in building permits and construction starts, orders for materials have not kept pace. According to the National Union of Quarrying and Construction Materials Industries (UNICEM), the war in Iran and its consequences on prices, production costs, interest rates, purchasing power, and confidence have weighed heavily on ongoing projects and construction sites.

The public works sector also suffered the repercussions of the municipal election cycle. In addition to these economic and political factors, there were difficult weather conditions, with significant rainfall in January and February, followed by several heat waves in May, June, and July.

Key figures for the first half

-5,9% year-on-year for ready-mix concrete deliveries in the second quarter of 2026

-1,7% year-on-year for aggregate production in the second quarter

-21,4% for orders in public works from January to May

-3 to -5% expected for annual ready-mix concrete production

-2 to -4% expected for annual aggregate production

Ready-mix concrete sales drop in May and June

The recovery trajectory of construction materials was interrupted by a series of shocks. After the trade tensions initiated by Donald Trump, the Israeli-Palestinian conflict and the political and institutional instability of 2025, the first half of 2026 was marked by the war in Iran, the blockade of the Strait of Hormuz and unusually intense weather events.

In this context, the ready-mix concrete (RMC) activity has deteriorated significantly. In June, a month marked by 14 days of heatwave, volumes decreased by nearly 5% compared to May and by 10% compared to June 2025, in seasonally and working-day adjusted data.

Over the second quarter as a whole, ready-mix concrete deliveries fell by 3,6% compared to the previous quarter and by 5,9% year-on-year. Cumulatively over the twelve months to the end of June, production now shows a decrease of 3,3%, compared to -2,6% six months earlier.

Aggregate production is also contracting

On the aggregates side, extractive activity is estimated to have decreased by nearly 6% in June compared to May and by 5,6% compared to June 2025, according to provisional CVS-CJO data from UNICEM.

Volumes produced in the second quarter fell by 3,7% compared to the first quarter and by 1,7% compared to the same period in 2025. Cumulatively over twelve rolling months to the end of June, aggregate production contracted by 2,4%, compared to -1,3% six months earlier.

The fifteen days of heatwave recorded in July suggest, according to UNICEM, that further monthly statistics will be worse.

Source: UNICEM, monthly survey. Provisional data.

The materials indicator does not yet reflect the most recent shocks

Available until April, the UNICEM materials indicator stood at 85,6. It was rising for the second consecutive month, by 1,6% compared to March and by 3,7% compared to April 2025, in seasonally adjusted data.

The trend remained almost stable over the last three months, with a decrease of 0,2% compared to the previous quarter and an increase of 0,6% year-on-year. The change also reached only +0,2% between January and April and -0,3% over twelve rolling months.

Methodological note: The materials indicator, expressed as a base of 100 in January 2021, measures the volume activity of a basket composed of aggregates, ready-mix concrete, concrete products, cement, tiles and bricks, building stones, stone-processing products, and mortars. It is constructed from INSEE's monthly turnover indices, deflated using the producer and import price index (IPPI), and then weighted according to each category's share of total turnover. Source: INSEE, UNICEM calculations.

The rebound in housing starts is not yet benefiting materials

According to business surveys by INSEE and the Bank of France, activity in the structural engineering sector reportedly increased slightly in June. After a May disrupted by holidays and the first heatwave, a "catch-up" effect was made possible by adjustments to working hours, particularly during the second half of June.

The outlook for July remained gloomy, however, due to order books penalized by weak public procurement and the slowdown in new housing construction.

In the first five months of 2026, the number of housing starts increased by 36,4% year-on-year, with a rise of 34,1% for single-family homes and 38% for multi-family dwellings. Over the last twelve months, the increase has reached 19,4%.

However, the level remains low. On an annual basis, the trend is around 307.000 housing starts, which is about 50.000 units less than the average observed over the last forty years.

In the non-residential sector, the area of construction started increased by 0,8% year-on-year during the first five months of 2026, with an increase observed in more than half of the regions. Cumulatively, over the last twelve months, this area has increased by 6,8%, reaching 20,975 million m².

These developments contrast sharply with the persistent decline in materials production. According to UNICEM, this discrepancy could be explained, in particular, by the time lag between the official or declared opening of a construction site and its actual orders: some projects that have already begun may experience delays in work or supplies. Weather conditions and the wait-and-see approach of operators could also contribute to this situation.

Building permits and sales are starting to slow down

The growth in housing permits is slowing. Between January and May 2026, their number increased by 10,5% year-on-year, with a 6% rise in multi-family housing and an 18,1% rise in single-family housing. Over the past twelve months, building permits for housing have increased by 14,8%.

For non-residential premises, however, the authorized areas have fallen by 6% year-on-year during the first five months and by almost 5% over twelve rolling months.

Several indicators upstream of construction also point to a slowdown. Reservations for new homes by individuals almost stabilized in the first quarter, with a decrease limited to 0,1% year-on-year, but they have fallen by 6% cumulatively over four quarters.

At the same time, developers' sales starts fell by 31,3% year-on-year at the beginning of the year, illustrating their caution in the face of market developments.

In the detached housing sector, sales fell by 10,1% year-on-year in May, according to Markemétron. Over the first five months of 2026, they are projected to grow by only 2,3%, compared to +34% a year earlier, following a 1,7% decline in the last three months.

Manufacturers are now forecasting a stabilization of the market in 2026 at its 2025 level, meaning at best 70.000 sales. This volume would remain well below the long-term average, estimated at around 120.000 annual sales.

The number of loans granted is declining in the new construction sector.

The loss of purchasing power linked to rising fuel prices, economic uncertainties and the still high level of new property prices have weighed on household real estate projects and their use of credit.

The rise in rates remained relatively limited: the average rate of mortgage loans reached 3,26% in June 2026, compared to 3,06% in June 2025.* Despite the stability observed in recent months on the new-build market, the number of loans granted decreased by 14,3% year-on-year in the second quarter.

Over twelve rolling months, their growth has thus been reduced to 9%, compared to 41% a year earlier.

* Source: Crédit Logement/CSA Observatory, analysis of the mortgage market in the second quarter of 2026.

Public works anticipate an 8% decrease in 2026

The situation in the public works sector also deteriorated in the first half of the year. In addition to the repercussions of the municipal elections and budgetary constraints, there was a rise in production costs, particularly due to increased fuel prices.

At the end of May, order intake was down 21,4% year-on-year since January, in volume. Billings also declined by 7,1%. Faced with this deterioration, public works professionals now anticipate an 8% contraction in their activity volume for the whole of 2026.

Further declines expected for ready-mix concrete and aggregates

The losses in activity recorded in the first half of the year and in July, due to bad weather and the consequences of the war in Iran, are leading UNICEM to revise its outlook for 2026.

Ready-mix concrete production could contract by 3 to 5% in raw figures for the year. Aggregate production would decrease by 2 to 4%, bringing volumes back to historically low levels: approximately 31 million m³ for ready-mix concrete and less than 300 million tonnes for aggregates.