Economics and politics seem to be the main influencers of the UK aggregates industry at present. Adrian Greeman reports
The dominant issue affecting the UK aggregate industry is, unsurprisingly, the economy and the impact of the credit-crunch. That for the moment has pushed into the background various other issues including new environmental controls, the possibility of devolved planning bound up in the general election and the development of transport.
One other change has been consolidation of the industry, this time not among the companies but in the lobbying and representative bodies. The big five major players, remain the same; Mexican-owned
The change since April 2009 reflects the strong vertical consolidation of cement production, ready mix concrete, asphalt and silica sand and aggregate quarrying in the UK, particularly with 80% of total output controlled by the majors.
A small and medium size company sector does remain in the UK and some have carried their membership through into the MPA. They form a bustling independent sector with some 200 or so smaller firms also spoken for by the
But all have felt the downturn. "Volumes started going down in 2008 and more last year," said MPA economist Jerry McLaughlin. "We have seen aggregate and cement drop by 35% and ready mix by 40%. Asphalt is down 20%."
Primary aggregate output had been climbing slightly in the preceding years, not quite to the 280million tonnes output achieved in 2004 but close at around 209million tonnes. From 2007 to 2008 this fell to 187million tonnes and then more steeply to 143million tonnes last year.
Recycled aggregate, a relatively strong part of the UK market compared to many other countries and which has shown a steady increase in use over the last decades, helped by the Landfill Tax, dropped back from a peak of 71million tonnes in 2007, to 64million tonnes in 2008 and 51million tonnes in 2009.
McLaughlin said that he is expecting some further drops this year though much less severe, and possibly an upturn in the recycled sector, "But there is not much anticipation of things getting any better soon, and no signs of things improving over the next two years." Forecasts for the construction industry are "kind of modest" and showing a flat picture or one that is still dropping, according to McLaughlin. "And it may not even have bottomed out yet," he said.
Construction on which aggregates depend is not encouraging. The Construction Products Association declares in its latest spring 2010 assessment that the economy has stabilised and even has "begun its long road to recovery" but only after the sharpest recession on record "with a fall of 5% in GDP in 2009 alone".
"Following last year's 12% drop in output, the sharpest annual fall in 35 years, a further 3% fall in output is anticipated during 2010. By the end of 2010, the construction industry will have endured a recession two and half times worse than the overall economy. Recovery for the industry is anticipated only in 2011 with relatively slow growth of around 1% per year until 2014, when growth returns to long term trend levels.
That was before the general election and the impact of cuts on government expenditure which all the major parties will make.
So far the aggregate industry has not seen a rash of bankruptcies or further consolidation said McLaughlin, "You are seeing quarries mothballed or closed and some fewer concrete plants."
In the small business sector the companies have been taking the punches claimed Richard Bird at the British Aggregates Association. "It is the bigger guys who have the greater difficulties because they have to pay back the banks, or mortgages," he said. "A lot of my members own the land for their one or two quarries or extraction pits and usually they don't buy machines unless they have the cash for them." That does not mean there is not a heavy impact. Unemployment has increased as workers have been laid off. "East Anglia has suffered a lot," said Bird.
Like many in the industry he is urging that there should not be any further construction cutbacks.
McLauglin agreed, "For the first time a recent study from LEK consulting has put some precise figures on construction's impact showing a £1 spend produces £2.84 of overall output." Significant hopes are pinned on major projects continuing such as the nearly £20billion Crossrail tunnel project in London and perhaps major offshore energy schemes. The Severn barrage tidal energy project would demand huge amounts of aggregate for both concrete and embankment fills if it goes ahead. New nuclear power schemes near the coast would also create demand.
"But these are all some way off," pointed out McLaughlin. Immediate schemes, like the Olympics, have some effect but only in the London area..
For larger firms efficiency drives and careful cost cutting can have a cumulative effect if deployed widely. At Cemex for example a programme of both improved plant use and energy awareness have been deployed across the company's quarries and pits "bringing operatives and managers to look at how they do things".
Small measures like switching off idle engines, not overreaching with bucket heights, or minimising load paths for machine movements are all looked at closely, bringing in expertise such as the
Such prudence and "Scottish parsimony" will save 20% on machine costs Cemex vice president aggregates and asphalt Lex Russell thinks and he anticipates a 25% positive impact on profitability over two years. It also contributes to the sustainability agenda which the industry has subscribed to in recent years.
Another side of this is a steady move to increasing rail operations for transport where possible cutting carbon footprints. With its unusual split of lowland in the south and east and higher ground and harder rock in the west and north the UK needs more long distance movement than many countries to balance an uneven distribution of sand and gravel and crushed rock resources. Rail is helping and firms have made efforts to use rail transport. Cemex recently opened a new depot in the Sheffield area for importing materials from Derbyshire quarries, bringing its overall rail use to around 12%.
The delivery point was previously an unused siding, renovated at low cost and now handling 200,000tonnes of material a year for ready mix use and asphalt, and self-collect custom.
Ship landed aggregate also helps reduce lorry movements. More than most countries the UK balances its resources with sea dredged aggregates. Though it constitutes only around 6% of overall supply it is important in some regions, particularly for the densely populated south and south-east around London, supplementing land supply with up to one third of volume, and for mountainous Wales which has good crushed rock resources but almost no land based fine aggregates.
An overall 21.2million tonnes was dredged from seabed deposits in 2008 down 6% from 2007's 23.2million tonnes and 24million tonnes the previous year. Just over half comes into the UK and the rest is exported to northern Europe, mostly the Netherlands and Belgium.
For the future this sector is coming under a completely revamped regulation as the detailed workings of the new Marine and Coastal Access Act are established. The
It means more certainty for the industry said BMAPA director Mark Russell and a cooperative atmosphere for dealing with sea use conflicts, sustainability, environment and even archaeological issues.
