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Construction ‘supercycle’ predicted on wave of government spending

Construction sector updates

Industry bosses are predicting a worldwide construction “supercycle” that is set to fuel demand for building materials as governments pump billions of dollars into post-pandemic infrastructure projects.

Jan Jenisch, chief executive of the world’s largest cement producer Holcim, forecast that a boom in global construction would carry on for years as developed nations step up spending on modernising infrastructure.

“Stimulus will slowly start. That’s going to be for the next four or five years,” he told the Financial Times. “I think we are in a supercycle for construction and building materials going forward.”

Fernando González, chief executive of Mexico’s Cemex, backed his Swiss-based rival, saying stimulus in advanced economies would also boost cement demand in emerging markets through remittances and trade.

“Additional fiscal stimulus, such as the [EU] Green Wave and the proposed America’s job plan will lead to a significant cement-intensive infrastructure spend in late 2022 and beyond,” he said.

Noble Francis, economics director at trade body the Construction Products Association, agreed there would be a “long-term supercycle” for construction in important markets.

He pointed to a long-term shift by governments towards net-zero carbon emissions as well as big infrastructure projects across roads, rail, water, ports and energy as they seek to drive economic growth.

Plans that are set to boost spending on infrastructure and lift demand for cement, the world’s most consumed man-made material, include US president Joe Biden’s proposed $1tn infrastructure package.

Brussels has also begun approving national plans to dish out its €800bn EU recovery fund, while in the UK prime minister Boris Johnson has set aside £600bn over the next five years for infrastructure.

Cemex’s chief financial officer Maher Al-Haffar predicted there would be 20 to 30 per cent higher demand for cement in the US if Biden’s infrastructure bill was passed, supporting demand for imports.

But Francis tempered some of the enthusiasm. The years ahead were unlikely to match the supercycle of the 2000s, which was driven by an unprecedented period of growth for China, he said.

“This is likely to be a substantial supercycle that is slower than that of the 2000s, but sustained over a longer period.”

Construction industry executives also fear that higher prices could water down the impact of government infrastructure spending.

Prices for building materials have already jumped as economies around the world reopen and lift travel and lockdown restrictions.

Travis Perkins, the UK’s largest builders’ merchant, increased prices of bagged cement by 15 per cent in May and warned that inflationary pressures would persist.

The surge in demand has also led to shortfalls of timber and plasterboard-related materials, with products such as insulation boards sold by Holcim sold out for the rest of the year.

Even so, strong construction markets are lifting profits for the time being. Holcim has posted record first-half earnings and upgraded its full-year guidance on the back of soaring demand.


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