Activity in the building materials market remains very sluggish at the start of 2023

Even if inflationary pressures have moderated on the energy front at the start of 2023, the spread of soaring costs continues and the rise in prices continues to spread to all sectors.

At the same time, banking conditions are tightening with rising interest rates and tighter credit standards. For households, this pressure on purchasing power and solvency imposes choices on them (when they are not suffered) and the arbitration of which can only be unfavorable to real estate investment.

For the time being, building activity is "resilient" thanks to the high level of orders placed, but the order books, part of which could be canceled due to a lack of financing, are gradually emptying and the fall in housing sales suggests that they are not will not fill up in the next few months.

On the public works side, activity is slowing down at the start of the year and the sector is still awaiting an awakening of public procurement which could sustainably and solidly fuel activity. In this context, the production of materials over twelve rolling months continues to deteriorate: the decline goes from - 4,6% to - 6,8% between the end of December and the end of February for aggregates and from - 4% to - 5,1, XNUMX% for BPE.

February, a little “better” than January

According to the first results of the UNICEM monthly survey for February, the activity of ready-mixed concrete and aggregates would have strengthened very slightly compared to January but would remain well below its level of a year ago. . Aggregates production thus gained +0,7% between January and February (CVS-CJO data) but was -12,5% below its February 2022 level.

Several factors may explain this gap, starting with an unfavorable base effect, with the start of 2022 having seen a rebound in activity. The traditional technical maintenance operations on the sites at this time of year, coupled with precautionary overproduction at the end of 2022 (linked to the climate of energy uncertainty) may also explain this poor start to the year, which is however part of a fairly gloomy underlying trend.

Thus, over the December-February quarter, production lost -1,4% compared to the previous three months and is -9,5% below its level of a year ago.

Cumulatively over twelve rolling months, the trend in the aggregates business now shows a decline of -6,8%.

On the BPE side, deliveries in February increased by +1% compared to January but were down -4,9% compared to February 2022 (CVS-CJO data). However, the trend seems less negative than for aggregates since, over the last three known months, production has stopped falling compared to the previous three months (+0,4%) even if it remains lower than that observed over the same period. in 2022 (-5,3%). Over the first two months of the year, ready-mixed concrete deliveries fell -5,9% over one year and lost -5,1% cumulatively over twelve rolling months. In two months, the annual rate of activity for ready-mixed concrete has thus lost 1 point against more than 2 points for aggregates.

The UNICEM materials indicator, still provisional for January-February, also reflects a difficult start to the year. After a fourth quarter down -3,6% over one year (and a year 2022 down -3,1%, CJO data), the indicator shows a contraction of -9% over the first two months of the year. 'year.

New housing: the scenario is getting tougher

According to the latest information published by the FFB during its press conference on April 12, the new housing crisis has now begun. All the indicators are gradually turning orange or even red, auguring a difficult end to the year.

The INSEE survey of building manufacturers confirms this in March: very resilient until early 2023, the business climate is deteriorating for the second consecutive month, as is the opinion of entrepreneurs on their business prospects. Although still well above their long-term average, the levels of these indicators signal a trend reversal that is set to continue.

In terms of order books, the judgment made by structural work professionals also continues to deteriorate even if, in absolute terms, they still total 9,3 months of work stocks (ie 3 months more than on average). But the comparison with the same type of indicator produced by the Banque de France, whose balance of opinion has just moved into negative territory in February-March, suggests a certain fragility of these notebooks, undoubtedly made up in part of work " in the queue" and whose performance guarantee is not guaranteed.

As a corollary (and/or consequence) of this slowdown in activity, the tensions on the productive apparatus continue to ease and the obstacles limiting production, although still significant, have moderated for three months. It must be said that the productive apparatus is less in demand: at the end of February, and year-on-year over three months, housing starts fell by -1,3% under the effect of a sharp decline in the individual (-8,6%) and an increase (provisional, due to a longer period of realization of the permits) in the collective (+4,4%).

This situation should worsen, judging by the trend in authorizations, which plunged by -26,6% over the same period, the fall being even more marked for the individual (-37,8%) than for the collective (-14,9 .XNUMX%) and the risk of an increase in license cancellations cannot be ruled out given the difficulties in securing funding.

Housing sales from developers to individuals have indeed fallen significantly, particularly in the fourth quarter (-30,9% over one year compared to -14,6% over the whole of 2022) and the cancellation rate has strongly increased (21,6% at the end of 2022 against 16% on average over the year).

Sales of individual home builders are not doing any better: according to Markemétron, in the first two months of 2023, they plunged by -40,3% compared to their long-term average.

As for the social housing sector, it is following the same trends with block sales down -15% in 2022. Only the non-residential segment seems to be resisting with permits which continue to accelerate (+7,9% in year-on-year over the December-February quarter) even if housing starts continued to contract (-14,5%).

TP: better but...

As for public works, the start of the year was marked by activity that was virtually stagnant compared to last year's level, which was itself sluggish. Admittedly, according to the FNTP, invoicing increased by +4,9% year-on-year over the first two months of the year, but given the evolution of costs (which again tightened at the start of the year) , the change in constant euros amounts to -1,2%.

A few projects in major cities and the awarding of large-scale contract lots (Lyon-Turin tunnel, Toulouse metro) boosted books (+29,9% in volume and year-on-year over the January-February two-month period) but this rebound hides significant territorial disparities and the major operators represent only a quarter of the market.

The sector is still waiting for local authorities to take over (40% of public works customers), including the recent increase in gross savings (+5,9% over one year) and the state of cash ( 76 billion euros at the end of January 2023) would make it possible to calmly initiate a restart of investments.

Materials 2023

In this lackluster context at the start of the year, the outlook for materials for 2023 has been revised downwards. Down -4% in 2022, ready-mixed concrete deliveries should fall again, by -5%. As for the aggregates market, after a contraction of -4,6% in 2022, production could contract by -6% this year.