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Materials market faces tougher time next year

It looks like 2009 will be a tough year for the steel and cement sectors, but the Government’s green regs might help timber sales

Production of building materials is set to drop significantly next year. The output of steel, timber and cement for use by the construction industry is forecast to be cut by more than 10 per cent in 2009.

The cuts come on top of production of all three having been significantly reduced throughout 2008 compared to last year.

Steel output is forecast to drop by 14.2 per cent from 1.4 million tonnes to 1.2 million in 2009, says the British Constructional Steelwork Association.

Steel prices are also set to drop between 10 per cent and 20 per cent in 2009 due to the plummeting cost of the components of steel.

The cost of shipping has fallen 95 per cent compared with this time last year as has the cost of iron ore and coke.

BCSA director general Derek Tordoff said: “It is likely that there could be steel price reductions in the first half of 2009.

“But the fundamentals of world steel supply in the medium and long-term are unchanged and it is anticipated that global demand and prices will eventually rebound, the key question is exactly when and this is difficult to forecast.”

Meanwhile, cement output is down 15 per cent this year to 11.1 million tonnes from 13.1 million tonnes last year, according to the British Cement Association.

The BCA is forecasting a further 10 per cent drop next year to around 10 million tonnes. The BCA’s Paul Hunter said: “Admittedly 2007 was a good year, it was 5 per cent up on the year before. But this year has been awful and so will next year.”

Jerry McCloughlin of the Quarry Products Association added: “The way things have gone over the last six months, any forecasts are delivered with less confidence.

“There will definitely be a reduction in the number of new schemes next year and as a result, fewer building materials will be needed.

“It is difficult to know when it will bottom out, but it is fair to say that the Chancellor’s forecast of Q3 next year seems a little optimistic.”

It is a similarly bleak picture for timber, according to the Timber Trade Federation, largely due to UK house building being at its lowest level since World War II.

Last month one of the UK’s biggest manufacturers of roof trusses and timber engineered products, Palgrave Brown, plunged into administration.

Timber Trade Federation chief executive John White said: “We have significantly downgraded our forecasts for 2008 and are looking at substantial falls next year. The decline has been so rapid and it is very much a case of survival now.”

But Geoff Arnold, the incoming chairman of the UK Timber Frame Association, said timber frame production will increase next year due to demand for more energy efficient homes under the Code for Sustainable Homes.

The percentage of timber frame homes is expected to increase from 22.1 per cent in 2007 to well over 25 per cent in 2009.

“Despite the depressed housing market, we are seeing relatively strong demand for timber frame across all sectors.”