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The building materials market shows no sign of recovery – back to adobe!

Published in Evenimentul

The masonry market is stuck and demands patience before returning to the performances recorded in the economic boom years. Construction market players are afraid to make predictions, most of them accusing the inconsistencies in public policies and therefore the instability in the real economy. 2011 was unanimously declared by all manufacturers of building materials one of the most difficult years on the market, with falling prices and feeble demand. “The trend on the building materials market proved uncertain since early this year. Considering that sales volume is directly influenced by demand, compared to 2010 the masonry market had a negative evolution in the first half year, sales going down about 15%. Brick prices also dropped 15% since the beginning of the year, bringing the masonry market value to a historic low. We hope that by the end of 2011 things won’t get worse and the market volume will record only a 10% decrease compared to 2010. It will take years till a significant evolution and a comeback to a situation similar to 2008 are possible, “stated Iulian Mangalagiu, manager of Ceramica SA Iasi.

Demand, stifled by Romanians’ pessimism

A boost of the recession effects among the population as well as the austerity measures imposed by the government were two causes that brought the demand of masonry materials that sent cold ripples through the construction branch. Job insecurity as well as the rigidity in giving out loans were two other factors that have stifled the Romanians’ desire to invest in homes. "The market has been in decline and will keep this trend, reaching a minus 2 percent by the end of year. Government investments as well as restoring the Romanian consumers' trust of in the need for comfort and refinement are two possible ways to revive this sector, “said Claudiu Georgescu, president of the Association of Producers of Materials for Construction of Romania.

Gas ignites the price of construction materials

The impact of the recession was also felt with respect to prices, which dropped on average 15% in 2011, placing themselves on the floor offered by demand. Nevertheless, this hasn’t generated an obvious increase in sales, which continue to be sensitive to the state of the economy and the average income per person. Contrary to general belief, the 2011 prices practiced on the market followed a downward trend and almost all masonry materials manufacturers were forced to revise their offers and prices, being at the same time affected by higher costs of raw materials and utilities. The prices of masonry materials went down approximately 15% over the same period last year, “ explained the general manager of Ceramica S.A. Iasi.

But things may change before long. Miracles regarding lower prices will last until autumn, given that utility prices for industrial consumers are likely to explode starting with September. Independently of their will, constructors say they will have to adjust prices according to the market. "The major problem challenging the construction market that appears to further threaten the industry is common to the manufacturers of construction materials, namely the two-stage gas price increase announced for 2011. Another factor worthy of consideration is the ongoing increase in fuel prices, an aspect affecting long-term the industry in which we operate and, consequently, forcing the future market to adjust the prices of construction materials independently of its will. The solution to these problems will come along with recovery and finding a balance in terms of the economic situation both at national and European level, a factor we are totally dependent on, " added Iulian Mangalagiu.

The major commercial networks argue in turn that they have cut profit margins to the maximum, while producers have lowered costs to the limit of profitability, yet the market still seems inaccessible. The few programs that gave some hope to the producers of building materials are also uncertain. The thermal rehabilitation program was stopped, while Prima Casa ("First Home" governmental programme) is moving slowly. All this, combined with the Romanians’ caution to invest, make the masonry market a sector that, at least this year, gives no signs of picking up. (Diana Mihalcea)