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Deceptively positive Q2 sales volumes

THE latest data on second-quarter mineral products and construction performance have the potential to give a misleadingly positive impression of industry activity and prospects, according to the Mineral Products Association.

New MPA survey results indicate that aggregates, cement, ready-mixed concrete and asphalt sales volumes all improved in the second quarter of 2010, compared both with the same period of 2009 and the first quarter of this year.

Asphalt sales were 10% higher than in the second quarter of 2009 due to factors including emergency repairs and the progress of some major road contracts, while the rise in aggregate sales (crushed rock up 6% and sand and gravel up 2%) reflected the increase in road sector activity, but also the more general improvement in ready-mixed concrete sales (up 5%).

However, all of the increases recorded were based on historically low levels of market activity in 2009.

The MPA figures reflect the construction growth evident in the Government’s recent estimates of economic growth in the second quarter, which indicate surprisingly high 1.1% GDP growth in the second quarter, the main driver of which was a 6.6% increase in construction activity compared with the first quarter, and a 5.8% improvement since the second half of 2009.

However, the Association has warned that these improvements do not indicate a pattern of sustained growth. ‘In spite of these welcome improvements, there are no indications of sustained growth in either the mineral products or construction sectors,’ said MPA executive director Simon van der Byl.

‘High levels of mainly public sector investment in health, education and infrastructure have boosted construction investment in recent months, but government has announced very significant reductions in investment which will significantly reduce associated construction activity as existing projects are completed and not replaced.  

‘There is little likelihood of any significant improvement in private sector construction work over the next 18 months, therefore the recent improvements in mineral products and construction markets will be short-lived,’ he warned.

Mr van der Byl added that if the Government does cut construction investment to the extent currently predicted, construction output will flip from being the generator of economic growth highlighted in the second-quarter GDP figures to being a drag and constraint on economic growth in 2011, 2012 and 2013.

‘Considering the new planning uncertainties afflicting the housing market, continuing doubts about Crossrail, the questions over the funding and timing of new energy infrastructure and the axe hanging over road maintenance and construction work, it is difficult to see where overall market recovery will come from,’ he said.


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