The building materials business has almost returned to, if not exceeded, 2019 levels

It is true that demand is not weakening: in the building industry, order books remain at a high point in June and housing starts have regained their colors, especially in the individual market. On the public works side, the work carried out has picked up again and private orders are firming up. However, if many indicators are green, there are still a few points to watch out for: public procurement is still struggling to wake up, non-residential construction remains sluggish and certain tensions in the supply of materials (mainly imported) are hampering companies in their ability to meet demand. A situation to watch over the next few months ...

A good month of May for aggregates

According to the first results of the May survey, the production of aggregates and ready-mixed concrete has returned to its long-term average levels. Thus, the activity of aggregates, down slightly compared to April (-1,3%, CVS-CJO data), jumped + 16,6% compared to May 2020 (still disturbed by confinement on the top ten days) and + 2,1% compared to May 2019.

The volumes of the last three months have increased further compared to the three previous months (+ 0,5%) and, even if they quite logically exceed those of 2020 (+ 66,7%), they remain above those of the same three months of 2019 (+ 1,4%). Over the first five months of the year, aggregates activity shows an upward trend of + 1,1% compared to 2019 (+ 29,6% compared to 2020). On the BPE side, May deliveries certainly showed a clear mechanical rebound over one year (+ 15,7%) but fell back compared to April and compared to May 2019 (-4,3% and -2,3% respectively).

However, over the last three months, activity continues to progress slightly compared to the previous three months (+ 0,6%), exceeding that recorded over the same period of 2019 (+ 0,4%). Cumulatively since January, ready-mixed concrete deliveries have rebounded by + 37,1% over one year, remaining slightly below the level observed over the first five months of 2019 (-1%).

Our materials indicator reflects the same economic rebound at the start of 2021: the activity of the basket of materials indeed shows an increase of + 21,2% over one year in the first quarter and of + 33,7% over the five first months (provisional, CJO data), a rebound not only linked to the favorable base effect of containment since, compared to 2019, the increase was + 2,8%.

Building and public works: tensions in the face of demand

Confidence is not weakening in the construction industry. Indeed, during the survey conducted in June by INSEE, entrepreneurs were still very optimistic about their future activity.

The judgment made on their order books continues to improve, as does the balance of opinion on the planned workforce, which remains well above its long-term average. In structural work, the contractors estimate that, given their current workforce, 10 months of activity are ensured by the current books. This strong demand results in tensions on the productive tool since, in the structural work, 53% of the heads of company declare to be confronted with it. These constraints are partly explained by the shortage of personnel (68% of structural work companies have difficulty recruiting) but also by increasing difficulties in supplying construction sites.

Indeed, the shortages of materials, especially imported ones (steel, plastics, wood, metals), have affected the sector for a few months and the INSEE survey indicates that at the end of June 12,3% of construction companies were facing breakdowns. supply chain, a figure that has been rising since February and very clearly above the long-term average (1,7%). A situation that rubs off on prices, since more business leaders than in previous months to announce that they will increase their prices. On the building side, the revival of housing starts is confirmed although, for the non-residential sector, construction activity remains sluggish. Admittedly, over the first five months of the year, the surfaces started up of premises rebounded by + 16% compared to 2020 but they remain -12,2% below the level of 2019. As for permits, they have climbed by + 20,8% over one year, but show a level -19,2% lower than that of 2019 over the period. On the other hand, with regard to housing, the recovery is real: at the end of May, there were 390 housing starts over twelve months and, from January to May, the increase reached + 600% compared to 29,7 and + 2020% compared to 3,6.

The individual, like the collective, participate in this recovery but, for the first segment, the dynamic is also engaged on the permits. The latter have indeed rebounded by + 14,3% compared to 2019 (+ 36,7% over 2020) while, for the collective, the trend fell further by -11,4% (+ 15,6% compared to compared to 2020). On the public works side, the activity of these first four months of 2021 is also better than expected according to the FNTP. The rebound in work carried out (+ 23% compared to 2020, CVS-CJO) raises the latter above their already high level of 2019 (+ 1,1%).

However, despite a certain recovery in orders, especially from private customers, the level of books remains 9% lower than in 2019 due to a public order that is slow to revive. If the profession is still waiting for the effects of the recovery plan, it is also worried about inflationary pressures and the risks weighing on the supply of raw materials.

Outlook 2021

In light of these recent developments, the estimate of materials activity for 2021 had to be revised. The best results at the start of the year automatically enhance the annual trends, even though the assumptions initially made in the scenario for the second half of the year now appear too pessimistic. In fact, on the building side, demand appears much more solid than expected and bank financing conditions, which were to tighten from July 1, via HCSF regulations, will ultimately remain more accommodating for households (announcement of June 15) with , in addition, historically low home interest rates. This is a favorable context for the ready-mixed concrete business, even if the shortages of certain materials will temporarily slow down the smooth running of the works.

The demand for ready-mixed concrete could thus increase by + 5% between 2020 and 2021 (raw data) but it would remain below its level of 2019 (-3,8%). As for aggregates, the strength at the start of the year is a good “gain” on the annual trend. Partly driven by the dynamics of ready-mixed concrete, demand could also be supported by slightly better construction activity in the second half of the year. It could then increase by + 8% compared to 2020 but would also be below 2019 volumes (-1,4%).