Build on the rock
Wednesday, November 28, 2007/
Mining for construction materials – the elemental building blocks of crushed rock, stone and other useful minerals – is at the mercy of many fluctuating related industries. By JASON BAKER of IBISWorld.
By Jason Baker
The $1.8 billion construction material mining sector has grown strongly over the past five years buoyed by strong construction. But the future is looking like a rollercoaster ride with negative industry revenue growth of -8.8% predicted in 2010 but annual growth of 7.9% expected by 2012.
IBISWorld estimates that this industry, which is mainly engaged in quarrying, crushing or screening crushed or broken stone for construction materials, grew at an average of almost 7.6% annually during the five year period to 2007-08.
Continued growth in spending on housing, together with ongoing growth in business investment, underpinned a continued expansion in the demand for a range of construction materials.
In 2004-05, spending on non-dwelling construction activity, including aggregate-intensive projects such as roads, continued to expand strongly, with the output of crushed rock underpinning growth in revenue.
Spending on dwellings rebounded in 2006-07 and non-dwelling construction activity remained high, due in large part to ongoing growth in spending on resource development and infrastructure.
Early indications are that gains will continue to be made in 2007-08. Firms engaged in construction material mining are expected to report continued growth in both volumes of material extracted and prices.
IBISWorld forecasts that the industry will grow at an average of 0.9% per year during the five year period to 2012-13.
Real industry revenue is expected to expand solidly in 2008-09, before falling in 2009-10 and 2010-11 in response to weaker demand, especially from the non-dwelling construction sector.
A return to growth is expected in the final two years of the outlook period, as housing activity remains positive and non-dwelling construction spending revives.
One of the industry’s major players, Hanson plc, is almost certain to change hands in the latter part of 2007, following shareholder and court acceptance of a scheme of arrangement that will see Hanson acquired by the German firm HeidelbergCement AG. It is unclear what HeidelbergCement’s approach to the Hanson operations in Australia will be.
Real spending on housing is expected to be relatively buoyant over the outlook period, suggesting that this market’s demand for construction materials will increase solidly. The outlook for non-dwelling construction activity is less positive.
After a period of extremely strong growth in spending, firms are expected to focus on bringing newly constructed assets into production, rather than on additional investment in construction. Similarly, spending on infrastructure, much of which is associated with the resource boom, is expected to pass its peak during the outlook period.
IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au