The German precast concrete industry generated sales of over 8 billion euros in 2022. This corresponds to an increase of just under 10 percent. However, the increase in sales was accompanied by declining production volumes and is therefore largely price-driven. This was announced at the press briefing of the 67th BetonTage in Ulm on June 20, 2023. For the current year, the industry is expecting a further damper in view of the gloomy state of the construction industry. The reasons are the immense price increases for building materials and energy, the high construction interest rates and the loss of purchasing power. It therefore expects sales to decline by around 5 percent in 2023.
Housing slump
New orders in the construction sector rose by 4.8 percent in nominal terms last year (-9.7 percent in real terms). In residential construction, rising interest rates on loans and high construction costs made themselves felt. Many people who wanted to build were uncertain or simply could no longer afford to build. Order intake was therefore down (-3.9 percent). This also had an impact on the production of concrete components for residential construction. Sales of large-format wall components increased by 5 percent, but volumes declined by 1 percent. Manufacturers of large-format ceiling panels reported growth of 20 percent in volume and 21 percent in net merchandise value. Sales of concrete products for road construction, gardening and landscaping increased by around 3 percent. At the same time, there were volume declines of -7 percent here.
By contrast, the construction sector was supported by high demand in commercial construction and by the public sector. New orders for commercial construction increased by 6.3 percent in nominal terms, with only civil engineering orders rising (+16.5 percent), while orders for building construction fell by 1 percent. For manufacturers of structural precast elements, which produce typical components for commercial and industrial construction such as beams, columns and trusses, this represents a 19 percent increase in sales, although volume rose by only 4 percent.
The willingness of the public sector to invest has also grown in 2022. Public sector construction orders increased by 9.2%. Public-sector building construction recorded growth of 4.8 percent. The increase for public road construction was 8 percent, and for other civil engineering 13.1 percent. The manufacturers of drainage components such as pipes and manholes made of concrete could not really benefit from this. Although their sales rose by 9 percent, volume fell by 1 percent.
Rising producer price indices
The rising prices were reflected in the producer price index for building materials, stone and earth products. It recorded an overall increase of 15.1 percent in 2022. The index for cement rose by 17.9 percent. In the precast concrete products segment, price indexes for large-format floor panels have increased by 36.2 percent in 2022, and for wall panels by 15.2 percent. Structural precast elements recorded growth of 10.5 percent. For concrete pipes, the index was +17.8 percent. Producer price indices for concrete paving blocks and sidewalk slabs were +13.3 percent and +9 percent, respectively. This rising price trend continued in 2023. In the first quarter of 2023, for example, the index for cement rose by 48.7 percent year-on-year. For ceiling tiles it was + 31.7 percent, the price of walls recorded an increase of 17.2 percent.
Sales declines expected for 2023
For the current year, the precast concrete industry expects a slump in construction activity and an overall decline in sales of around 5 percent. Housing construction remains a problem child. The consequences of the almost complete cancellation of new construction subsidies last year are making themselves strongly felt and have led to order cancellations. Due to rising interest rates on loans and high construction prices, further declines in demand are expected, particularly in single-family and two-family house construction. Building permits, an indicator of the future order situation, are already declining in new residential construction in the first quarter of 2023. The order backlog also decreased during this period, falling by 10.8% (-21.6% in real terms). By contrast, commercial construction increased by 4.1%; in public sector construction, the order backlog was 7.8% higher than a year earlier.
However, the goal of building the urgently needed housing stock of 400,000 homes per year is receding further and further into the distance. At the same time, prefabricated concrete components in particular could be used to quickly create high-quality living space.
The industry is calling for more investment incentives and fewer cost-driving regulations that make building more expensive overall.
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