Gloomy start to the year for the construction materials sector

But the deleterious effects of inflation and the tightening of monetary policy on the purchasing power and solvency of households continue to spread throughout the different sectors of the economy. The real estate crisis has contaminated the entire sector: construction, materials, developers, agencies, notaries... leading in its wake to a rebound in business failures and workforce reductions. In terms of materials, the start of the year is looking bad. BPE production is declining and the evolution of building permits does not suggest a recovery in the short term. Supported by the electoral cycle and construction projects in major cities, public works activity is doing better even if the start of the year seems to mark a pause... a better direction which, however, has hardly benefited the aggregates sector!

Key figures

At the end of January, over the last 3 known months, the production of aggregates and BPE contracted by -10% year-on-year (CVS-CJO data).

BPE deliveries plunge in January

After a month of December with a clear rebound compared to November, provisional materials production data describe a sharp decline in January. On the aggregates side, activity fell -5,5% compared to December (CVS-CJO data) and -7,1% over one year. Over the last three months (November to January), production was down -3% compared to the August-October quarter and lost -9,9% compared to the same period a year ago. . Cumulatively over the last twelve months, aggregate volumes show a decrease of -7,7%. Regarding BPE, the downward trend has become more pronounced in recent months. In January, deliveries plunged -11,1% compared to December, which leaves the level -16,4% below that of January 2023. Over the last three months, activity has lost another -3,8, 10% compared to the previous three months while it fell -2023%, compared to the same three months of 7,1. Thus, in cumulative rolling over twelve months, the downward trend reached -1% at the end of January, or almost 6,2 point less than three months earlier (-XNUMX% at the end of October).

The UNICEM materials indicator (still provisional for 2023 and January 2024) follows this trend: after a year of 2023 down by -9,5%, the activity of the representative basket recorded a fall of -18,8% over one year in January (CJO data). Just like aggregates and BPE, concrete products have had a difficult start to the year, confirming the severity of the materials crisis which is looming for 2024, even if activity in January has undoubtedly also suffered the impact. effect of bad weather (heavy precipitation, gusts of wind, etc.).

Low point reached for permits?

The latest survey conducted by INSEE in the construction industry confirms a gradual deterioration in the business climate in March. In the structural work sector, the judgment made by professionals on order books has now fallen below its long-term average level. As for the level of these backlogs, although it has fluctuated around 9 months for a year in the INSEE survey, it has continued to decline for 12 months in the survey conducted by the Banque de France which rather measures order flows. . In any case, tensions on supply (supply, equipment, etc.) have almost disappeared; all that remains is recruitment difficulties which are in fact taking on an increasingly structural character. The curves which measure supply difficulties on one side and demand difficulties on the other in the building sector (INSEE survey), and which often evolve in mirror images, have just crossed paths in March, the tensions on demand now take precedence over those linked to supply.

The recent publication of revised data from the ministry shows that, after a drop of -5% in 2022, housing starts fell by -24% in 2023. Over the last three months from November to January, the trend remains very negative at -23,3% over one year, leaving the number of housing starts at 291.100 units, cumulatively over twelve months at the end of January. This decline logically echoes the fall in permits recorded last year and which is continuing, albeit in a more moderate manner. Thus, in 2023, authorizations plunged by -24% over one year. At the end of January, over three months, the decline was only -2,1% but the trend remained very negative over twelve months (-23,4% for 369.1000 units). This smaller drop in permits, however, may not last given the state of the real estate sales market.

Indeed, in the fourth quarter of 2023, reservations still fell by -8,9% compared to the previous quarter (CVS-CJO data). With a total of 64.500 units marketed by developers in 2023, that is almost 40.000 fewer housing units compared to 2023 (-37,5%)! This trend is comparable among CMistes (builders of individual houses) who recorded a plunge in their sales of -40,6% over twelve months to the end of January (56.300 houses over the year). And the January trend does not really show any improvement even if, according to Markemétron, the low point could well be reached at the start of 2024. Likewise, after having crossed historic lows, the economic climate is becoming very clear. slightly on the real estate development side. This is what the quarterly survey conducted by INSEE in January suggests. After almost three years of uninterrupted deterioration, developers' opinions on the demand for new housing and on the prospects for changes in financing resources recovered in January. The balances of opinion remain, of course, well below long-term average levels but the change in trend, still modest, deserves to be underlined. It is also seen in their prospects for construction starts even if developers remain very cautious: fewer of them than in the previous quarter are considering studying new programs. In other words, if it is not excluded that the demand for housing will revive thanks to the moderation of interest rates and a less restrictive bank credit offer, the conditions for implementing the projects, as for they do not yet seem to be united on the promoter side (demand at half mast, land difficult to access and very expensive, etc.). On the household side, despite a decline in credit rates since December (-33 basis points, or 3,9% in February, according to the Housing Credit Observatory), intentions to carry out projects are still hesitant. Access to credit remains closely regulated by the Banque de France and the evolution of new property prices does not make it possible to restore the degraded solvency of candidates for accession (-0,1% for apartments and still +1,8 % for houses year-on-year, in the fourth quarter of 2023).

Public works: a break?

After a rather dynamic year for public works activity (+4% in volume in 2023), the month of January marks a halt with a decline in the volume of work carried out by -3,4% compared to December and -1,9% over one year (CVS-JO data). According to the FNTP, bad weather, with a number of non-working hours 1,5 times higher than a normal January, can in certain regions explain this dip in activity. The maintenance of a good level of order books and the optimism of professionals for their future activity suggest that this pause could be temporary. However, the announcements of budgetary savings (€1 billion of potential cancellation of State credits to finance the ecological transition), coupled with the risk of fallout from the real estate crisis on private investments, could, in the long term, weigh on the dynamics of activity in the sector.

Illustrative image of the image via Depositphotos.com.