Tuesday, 25 October 2011

The Future of Global Construction Aggregates

Despite a fall in demand during the world economic crisis, the consumption of global construction aggregates increased during the review period (2006–10), largely due to the positive performance of rapidly-developing regions. While South America experienced the fastest growth in consumption during this time, the US and European markets recorded the largest decline in demand.

London25 October 2011 - The turnover for sales of global construction aggregates is expected to increase to over US$150 billion by 2015, aided by the recovery of construction industries around the world. Aggregates consumption is heavily dependent on construction expenditure, and financial stimulus packages invested by the government will significantly improve sales of global construction aggregates.

Demand for aggregates fell with global economic crisis
Until 2007, a combination of low interest rates and easy access to credit led to a boom in the global residential construction market, resulting in a high demand for aggregates, particularly in developed markets such as the US. However, the sub-prime crisis that emerged in the US in late 2007 led to a fall in the demand for residential properties in 2008, a trend that spread to other countries and was a major factor in the global economic crisis that began in the same year. In turn, the financial slowdown reduced the availability of credit and subsequently, the demand for construction worldwide.

The impact of the global economic crisis was comparatively lower in developing nations than developed nations. The majority of emerging economies recorded strong construction industry growth and, consequently, a high demand for aggregates, while the industries of more developed countries fell into decline.

To counter the decline of their construction industries, many governments introduced financial stimulus packages consisting of huge investments in infrastructure projects, a move that led to an increase in the demand for aggregates in the infrastructure construction market. As a result, the consumption of construction aggregates is expected to recover by 2015.

Increased demand from developing countries
The Asia-Pacific, which is the largest consumer of construction aggregates in the world, recorded a significant increase in demand during the review period. The development of the manufacturing and services industries of countries in the region, and continued infrastructure development plans to support urbanization and rapid population growth, has increased the demand for construction aggregates in the region. In particular, increased levels of foreign investment in infrastructure development in India, China and Indonesia have strengthened the demand for aggregates in the region. In contrast, Japan, a developed economy, was the only country in the Asia-Pacific to record a fall in the consumption of aggregates during the review period, due to the decline of its construction industry.

South America, which is one of the largest producers of construction aggregates in the world, also recorded the fastest growth in the demand for the construction material of any region over the review period. This was largely the result of a high level of infrastructure construction activity, as the majority of countries in the region have increased public expenditure in order to improve infrastructure facilities. Brazil, the largest consumer of construction aggregates in the region, has allocated US$880 million for infrastructure and social projects to support its hosting of the 2014 World Cup and 2016 Olympics Games. As a result, aggregate consumption in the region is expected to further increase by 2015.

The Middle East and North Africa consumed the lowest value of construction aggregates, despite recording a positive growth rate over the review period. Growth in the demand for construction materials was largely driven by increased investment in transport infrastructure to improve transport links and create a favorable business environment across the region in order to attract foreign investment. Furthermore, the combination of rapid growth in economic activity and a rising population has increased the need for infrastructural upgrades in the region.

Demand falls in developed countries
Despite accounting for over a quarter of the consumption value of global construction aggregates in 2010, Europe experienced weak growth during the review period due to a fall in construction activity in Western Europe towards the end of 2008. However, this decline was offset by continued construction activity in Eastern European countries such as Poland and the Netherlands, and European construction activity is expected to improve by 2015, as Western European countries emerge from the economic crisis.

In contrast, North America was the only region in the world to register a decline in the consumption of aggregates over the review period. The decline was largely due to the effect of the sub-prime crisis on the domestic residential construction market, which is the largest end user of construction aggregates in North America, as a fall in the number of new housing starts reduced the need for construction materials. However, with the introduction of stimulus packages, construction activity is expected to improve in the US, with the consumption value of aggregates is expected to rise to almost US$30 billion by 2015.

Sustainable aggregates to gain popularity
The global demand for sand and gravel recorded the fastest growth rate of all construction aggregates during the review period. Crushed stone was the most consumed aggregate, accounting for over half of total consumption over the review period.

However, due to increasing global awareness of environmental issues and climate change, the use of recycled and natural aggregates is expected to rise over the next five years. These types will not only record the fastest growth in the consumption of any aggregate over the forecast period, but also increase their share of the turnover of global sales of aggregates from 3.1% in 2010 to 3.5% in 2015.

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For more information on the article, please contact:

Shelly Wills
Tel: +44 (0) 20 7936 6671

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