Drop in BPE and rebound for aggregates at the start of the year

But if these signals are going in the right direction, they will not necessarily stem the fall in construction starts and demand for materials which is expected to continue throughout 2024. They will, however, contribute to moderating the decline in permits and construction projects. The improvement in credit conditions (rates and more proactive lending policy on the part of banks) will make it possible to improve the solvency of households but will not be enough in the short term to restore it: the least public support measures and resistance The fall in new property prices will further weigh on the dynamics of household investment in housing. The market recovery will therefore be long and gradual but certain conditions already seem to be in place. Demand for materials should certainly benefit from a better economic situation in public works, but the nature and thickness of the backlogs will not be enough to avoid a new recession in the aggregates and BPE sector in 2024.

Key figures

Year 2024

A further drop in volumes is expected

• Aggregates: between -5% and -6%
• GEP: between -11% and -12%

Rebound in “aggregates” activity in February

After a rather bad month of January, materials production recovered in February. On the aggregates side, activity rebounded by +14,3% compared to January, raising volumes to +7,8% above those of February 2023 (CVS-CJO data). It is still too early to identify the origin of this recovery which could be explained by a strengthening of demand or/and by a simple catch-up effect of very slowed activity at the end of 2023. In doing so, the he activity over the last three months has gained +8% compared to the previous three months, which brings its decline to -1% compared to the same period a year ago. Over the first two months of the year, aggregate production is now on a very slightly positive trend (+0,6% over one year), with the cumulative figure over twelve rolling months falling to -6%. The developments are much more negative with regard to BPE, whose deliveries are down -12,1% compared to February 2023 despite a strengthening compared to January (+4,8%). The continued decline in construction starts is weighing heavily on demand for concrete. Even if, over the last three months from December to February, production has almost stabilized compared to the previous quarter (-0,5%), it shows a contraction of -9% compared to the same period of the last year and the decline in volumes is accentuated. Cumulatively rolling over twelve months, production lost -5,6% at the end of February while over the first two months of the year, it plunged -14,4% year-on-year.

After a decline of -9% in 2023 (CJO data), the materials indicator shows a drop of -12% over the first two months of 2024 year-on-year, including -6,6% for the month of February alone. Products intended for construction recorded the most marked declines.

Start of recovery of housing permits

After a -24,1% decline in housing permits in 2023 (to 371.500 units), the rate of decline is gradually moderating: over the first two months of 2024, permits for individual houses fell by -17,2%. over one year (compared to -29,7% in 2023) while those of the collective lost -6% (compared to -20,4%). Thus, over the last quarter known at the end of February, permits recovered by +4,4% compared to the previous three months (CVS-CJO data) and among them, those in the collective segment gained +9,6%. Certainly, authorization levels still remain low compared to the past and the shift has not yet occurred in the individual segment, but the low point seems to have been reached. On the other hand, in terms of construction starts, trends remain poorly oriented. After having plunged by -21,6% in 2023 (to 296.400 units), housing starts showed a decline of -25% in January-February, compared to a year ago, the individual segment observing a decline even more marked than the collective (-27,4% against -22,9% respectively). These trends obviously echo the fall in permits and, even if the rate of decline in construction starts has moderated slightly over the last three months (-0,6% over December-February compared to the previous three months , CVS-CJO data), we should expect another year of decline in construction sites started in 2024. Concerning business premises, the orientations are also bearish, whether over the whole of 2023 or at the beginning of 2024, but in magnitudes which are fortunately not comparable. After a contraction of -6,3% in non-residential permits in 2023, the January-February bimonthly period shows a decline of -3,4% year-on-year. As for the surface areas started, after having declined by -15% in 2023 (to 22,383 million m2), their decline also amounts to -3,4% year-on-year over the same period. Industrial premises and warehouses, which represent 35% of the surface areas started, have even recorded progress over the last three months. These trends suggest that the reduction in surface areas started should remain quite limited in 2024.

But one thing is certain: construction activity will see another year of decline, which will weigh on demand for materials. However, the conditions for a restart are slowly being put in place: thanks to the start of a drop in interest rates (-30 basis points between December 2023 and March 2024) and real estate prices (-3,9% in France including -6,8% in Paris over one year to the end of 2023), buyers are gradually resurfacing, according to the Orpi network. Banks, more willing to lend due to better profitability of credit activity, should also help to unwind the hitherto frozen market. These first signals are still tenuous and fragile and the fall in prices, limited to the old ones, remains insufficient to restore demand. But the start of a relaxation of the ECB's key rates, expected from the start of the second half of the year (-25 basis points in June according to analyst consensus), could nevertheless contribute to bringing buyers back to the market and thus unlock little by little the sequence of transactions. However, we will probably have to wait at least another year before new real estate returns to upward activity.

Public works

According to the FNTP, the work carried out at the start of 2024 fell slightly compared to last year, by -1,5%, in volume, over the first two months (CVS-CJO data). Cumulatively over the last twelve rolling months, activity nevertheless remains up +4,1%, as do the contracts concluded which, despite also a slight decline at the start of the year, still show an increase of 29,3 .23%. Driven by major projects (EPR, railway network modernization contracts, urban transport, etc.), the order books appear to be well stocked, in both the private and public sectors, even if the departments' investments are clearly less successful. oriented than those of municipalities and intercos. The drop in DMTO* revenue, linked to fewer real estate transactions (-2023% in 860.000 to 39), weighed on the gross savings of the departments (and regions) which fell by -9% year-on-year in December (compared to +XNUMX% for municipalities).

Materials outlook 2024

Public works professionals, although cautious about the risks of the real estate crisis spreading to private clients and vigilant in the face of the drop in certain grants to communities (cancellation of State credits), remain rather optimistic in the short term. term. The electoral cycle and major projects should continue to maintain activity. However, this will not be enough to offset the effects of the real estate crisis on demand for materials, which will contract for the third consecutive year and whose volumes produced will reach historic lows with less than 300 Mt for aggregates and 33 M m3. for BPE.

* DMTO: transfer rights for valuable consideration

Illustrative image of the article via Depositphotos.com.