Concrete price index

Over the five-year period through 2024-25, the UK CPI is forecast to increase at a compound annual rate of 4.9%, or change by +29.0 points, to reach 137 points. According to Department for Business, Energy & Industrial Strategy (BEIS) data, as published in its Monthly Statistics of Building Materials and Components (MSBMC) series – July 2021 edition – and where 'production' refers to 'products complete and ready for dispatch', 'deliveries' denote 'sold products which have left the premises', and 'stocks' represent 'manufacturer's stocks', the volume production of concrete blocks in Great Britain amounted to 73,554 thousand square metres (sqm) in 2019, up 26.9% compared to 2014 (57,943 thousand sqm). Meanwhile, total volume deliveries of concrete blocks in Great Britain equalled 70,081 thousand sqm in 2019, 23% higher than those in 2014 (56,953 thousand sqm) – stocks were up 68.9% in 2019 (9,144 thousand sqm) compared to 2014 (5,413 thousand sqm). With regards to ready-mixed concrete, BEIS data pointed to a 7% increase in the volume of deliveries made in the United Kingdom in 2019 (16,426 thousand cubic metres (th.cu.m)), relative to 2014 (15,348 th.cu.m); however, the BEIS MSBMC series does not publish data for ready-mixed concrete production and stocks. BEIS also reported that production of cement in Great Britain was up 1.4% in 2019 (9,079 thousand tonnes) compared to 2014 (8,958 thousand tonnes), while deliveries were also up over the same period, albeit by a comparatively faster rate of 3.7% between 2014 (8,751 thousand tonnes) and 2019 (9,078 thousand tonnes).

While, as BEIS data suggests, the rate of domestic production of concrete, cement and other cement-based concrete products was seemingly able to satisfy, and in some instances outpace, domestic deliveries in the pre-pandemic era, and indicated that reserve stocks held by manufacturers were somewhat plentiful, this data simply states how much cement and concrete products were produced domestically, actually sold within the domestic market, and held in inventory by manufacturers ready for distribution to downstream wholesalers, retailers or directly to end-users, on an annual basis. Accordingly, while giving a good indication of the discrepancy between demand and supply, this data does not necessarily reveal the full extent of underlying demand for concrete - perhaps proxied by new order volumes, albeit official data is unavailable - the flow of cement and concrete products trade, and how the latter could satisfy or otherwise dissatisfy the former; instead, BEIS data indicates that some demand was satisfied, but not to what degree. Over the past decade, a sustained rise in the CPI has in fact been driven by demand-side factors, with a high level of construction activity in the UK economy, and spanning across the residential, commercial and infrastructure markets, driving demand for concrete products, a key input in the lion's share of large-scale construction developments. According to the MPA, circa 16 million cubic metres of ready-mixed concrete is used in Britain per annum which, while the MPA states fell from a peak of approximately 24 million cubic metres a year pre-financial crisis, is now trending upwards, and the MPA forecast usage could reach some 25 million cubic metres by 2025 based on the trajectory of construction activity levels similar to those recorded pre-pandemic. Compounded by a post-referendum devaluation in the trade-weighted value of the pound sterling, whereby currency market turmoil induced exchange rate-driven input price inflation, a high level of UK construction activity translated into greater demand for input materials and, in turn, lengthened lead times for cement and concrete in construction market supply chains. Accordingly, the CPI increased for nine consecutive years through 2019-20, reaching 108.0 points.

Having inflated by a further 0.6%, or +0.6 points in absolute terms, in 2020-21 (108.6 points), the CPI continued on its upwards trajectory through 2021-22 (119.7 points), whereby it rose by 10.2% year-on-year - +11.1 points, its highest level since comparable records began in 1996-97. Upon the onset of the COVID-19 (coronavirus) pandemic, and amid consequent public health restriction mandated by government, supply chains disruption ensued, whereby reduced capacity in industrial production markets limited the availability of materials and other inputs among suppliers. Epitomising such a trend, BEIS reported an 18.1% year-on-year reduction in concrete blocks volume production in 2020, which in turn depleted stocks by 34.8% on an annual basis and caused disruption to deliveries; the latter fell by 11.5% in 2020 alone due to the knock-on effects of depleted supply. Meanwhile, disruption to the flow of trade and limited access to regular supply lines, by way of travel bans and import-export restrictions, further constrained the inventory of construction materials. While construction activity effectively froze during the Spring 2020 lockdown, with the government mandating all non-essential on-site works pause while firms implement necessary operating procedures as per Construction Leadership Council (CLC) guidance, and while many projects were delayed, postponed or otherwise cancelled, as stakeholders assessed the feasibility to continue from a financial and operational perspective during the pandemic, the fact critical construction works were permitted to continue, in addition to the release of pent-up demand in construction beyond Q2 (April-June) 2020, meant underlying construction activity remained relatively high over the course of the 2020-21 fiscal year heading into 2021-22. Ultimately, a combination of persistently high demand for construction material inputs, and restricted supply caused disruption to industrial production output, inflated the price of cement and concrete. In its July 2021 Construction Product Availability Statement, the CLC announced that supplies of cement have been 'particularly hit due to ongoing unprecedented demand', adding that despite production lines at UK cement and concrete suppliers being fully operational, 'bulk cement are on allocation' and warned that it would take considerable time for stock levels to approach demand - 'demand for construction products remained high both in the UK and globally continued throughout 2021 in every sector.

On the morning of 24 February 2022, President Vladimir Putin announced that Russia was initiating a "special military operation" in the Donbas region, and proceeded to launch a full-scale invasion into Ukraine. This then led to various economic and diplomatic sanctions from Western countries, including the UK, towards Russia. These sanctions have been met with threats from Russia and orders my President Putin to place Russian nuclear deterrent forces on high alert. While the long-term global and domestic economic outcome of the Russian-Ukrainian war is uncertain at this stage, it is evident that this has been an influential factor towards the concrete price index. This is because of the response to Russia's actions, whereby energy giants such as Shell, BP and Exxon have pulled out of Russian energy deals, while the many Western countries have announced a ban on importing Russian oil and other petroleum products, which has significantly disrupted the supply chains across the globe. In addition to this, higher prices oil prices as a direct result of Russia's invasion of Ukraine have been compounded by strong consumer demand across the globe as the world has attempted to recover from the pandemic and weak supply as the leading oil-producing nations throttle output. As a result, the globe has endured significant supply chain disruptions and surging energy prices (inclusive of oil). All of which is projected to compound and lead to rising concrete prices within the UK. Overall, the UK CPI is forecast to accelerate by 14.5% - +17.3 points in absolute terms – in 2022-23 alone, reaching an estimated 137 points.