Displaying items by tag: Brexit

Demand for heavy building materials in the UK dropped in the first quarter of 2025, with ready-mix concrete sales reaching a new 60-year low.¹ In an update last week, the UK’s Mineral Products Association (MPA) attributed the decline to existing economic headwinds, compounded by global trade disruptions, reduced investor confidence and renewed inflationary pressures.

Major infrastructure projects – including the HS2 high-speed railway in the English Midlands, the Hinkley Point C nuclear power plant in Somerset and the Sizewell C nuclear power plant in Suffolk – failed to offset delays and cancellations by cash-strapped local councils to roadwork projects. Residential construction, meanwhile, is ‘slowly but steadily’ recovering from historical lows, amid continuing high mortgage rates since late 2024.

The most interesting part of the MPA’s market appraisal was its warning of ‘new risks emerging in the global economy.’ These concern the new tariffs raised by the US against its import partners. The possible consequences, the MPA says, imperil the UK’s supply chains, construction sector and growth.

Of particular immediacy is the threat of imports into the UK from countries that previously focussed on the US market. The MPA said that the industry ‘cannot compete’ against increased low-cost, CO₂-intensive imports. It named Türkiye, which sends around 6.9Mt/yr of cement and clinker to the US, as a key threat. Türkiye became subject to the blanket 10% ‘baseline’ tariff on 2 April 2025.

The MPA probably didn’t have a particular company in mind when it said this. However, it bears noting that Turkish interests gained a share of UK cement capacity in October 2024, when Çimsa acquired 95% of Northern Ireland-based Mannok. Besides the Derrylin cement plant (situated on the border between Fermanagh, UK, and Cavan, Ireland), Mannok operates the Rochester cement storage and distribution facility in Kent, 50km from London. The facility currently supplies cement from Derrylin to Southern England and the Midlands. It could easily serve as a base of operations for processing and distributing imported cement and clinker from further afield.

Meanwhile in South West England, Portugal-based Cimpor is building a €20 – 25m cement import terminal in the Port of Bristol. The company is subject to 20% tariffs on shipments to the US from its home country. Its parent company, Taiwan Cement Corporation, is subject to 32% US tariffs from Taiwan.

But the plot thickens… On 8 May 2025, the UK became the first country to conclude a trade agreement with the US after the erection of the new tariff regime, under which the US$73bn/yr-worth of British goods sold in the US became subject to a 10% tariff.² The latest agreement brought partial relief for an allied sector of UK cement: steel. 180,000t flowed into the US from the UK in 2024.³ In 2024, the UK exported 7120t of cement and clinker to the US, up by a factor of 10 decade-on-decade from just 714t in 2014, all of it into two US customs districts, Philadelphia and New York City.⁴

In what may be one of the first true ‘Brexit benefits,’ UK cement exporters now ‘enjoy’ a US tariff rate half that of their EU competitors, notably those in Greece. Like the UK’s more modest volumes, Greece’s 1.82Mt/yr-worth of cement and clinker exports stateside also enter via the US’ eastern seaports, at New York City, Tampa and Norfolk. Given the overlaps in ownership between the Greek and UK cement sectors, it is conceivable that optimisation of cement export flows across Europe may already be under discussion.

On 6 May 2025, the UK and Indian governments announced a trade deal that will lift customs duties on almost all current Indian exports to the UK. UK MPs are still seeking clarifications as to whether this will include industrial products that might be dumped.⁵ Theoretically, the threat from an oversupplied and fast-growing cement industry like India’s could be existential to the UK cement industry.

As the UK invests heavily in its future, including with the HyNet Consortium, imports pose a major threat. Given enough time, the UK could develop a leading position in the decarbonisation space. Will it have enough time? Existential threats certainly add a sense of jeopardy.

References
1. Mineral Products Association, ‘Weak start to 2025 for building materials sales amid growing economic headwinds,’ 6 May 2025, www.mineralproducts.org/News/2025/release16.aspx

2. HM Government, ‘UK overseas trade in goods statistics November 2024,’ 16 January 2025, www.gov.uk/government/statistics/uk-overseas-trade-in-goods-statistics-november-2024/uk-overseas-trade-in-goods-statistics-november-2024-commentary

3. UK Steel, ‘US 25% tariffs on UK steel imports come into effect,’ 12 March 2025, www.uksteel.org/steel-news-2025/us-25-tariffs-on-uk-steel-imports-come-into-effect

4. United States Geological Survey, ‘Cement in December 2024,’ January 2025, https://d9-wret.s3.us-west-2.amazonaws.com/assets/palladium/production/s3fs-public/media/files/mis-202412-cemen.pdf

5. Welsh Liberal Democrats, ‘UK-Indian Trade Deal: Government Refuses to Answer Whether it Has Conceded on Cheap Indian Steel Imports,’ 6 May 2025, www.libdems.wales/news/article/uk-indian-trade-deal-government-refuses-to-answer-whether-it-has-conceded-on-cheap-indian-steel-imports

UK: Breedon Group’s revenue remained stable in 2020 at Euro1.08bn. Its underlying earnings before interest and tax (EBIT) fell by 34% year-on-year to Euro89.3m in 2020 from Euro136m in 2019. Cement sales volumes stayed stable at 2Mt but ready-mixed concrete sales volumes dropped by 13% to 2.6Mm³ from 3Mm³. The group reported a strong second half of 2020 following coronavirus-related disruption.

“Although we remain mindful of the ongoing impact of Covis-19, with the worst of the pandemic now hopefully behind us and some welcome clarity on Brexit, I believe the prospects for Breedon and for our industry are increasingly positive,” said Pat Ward, Breedon Group’s chief executive.

Ireland/UK: Mannok says that it has undertaken extensive preparatory measures to help its operations continue smoothly when the Brexit transition period ends on 31 December 2020. While keeping operations unchanged, the group has formed new legal entities such as Mannok GB, which will deal with UK customers. The group acknowledged that prices would depend on the future tariff arrangement between the UK and the EU, but would remain in line with market pricing. It added that the same effects would impacts competitors, who import significant amounts of raw materials from Europe.

The group said that it has been working closely with suppliers for over 18 months to ensure the security of its supply chains. It sources almost all raw materials for cement production from its own reserves.

Chief financial officer Dara O’Reilly said, “A key priority for us in all of this was to ensure that the service we can provide to our customers in a post-Brexit environment is as seamless as possible. We’ve made the changes to our structures; we’ve made the changes to how we operate and as a result of that, regardless of the outcome of the Brexit negotiations, we’re ready.”

Germany: Following a comprehensive review of its assets HeidelbergCement has announced a Euro3.4bn impairment to its company value compared to the figure from a precious valuation prior to the second quarter of 2020. The company gave the reasons for the impairment as: the demand impacts of the coronavirus pandemic; economic effects on operations in individual countries; notably in the UK post-Brexit; and an increase in the market risk premium used by the Institut für Wirtschaftsprüfer (German public auditing body) for valuation to 7% from 6%. The largest regional impairment was Euro2.7bn, in Western and Southern Europe. Euro2.3bn of the total impairment, “relates to the Hanson acquisition” by HeidelbergCement in 2007.

UK/Nigeria: Aliko Dangote, the owner of Dangote Cement, has reiterated his intention to list the company on the London Stock Exchange (LSE), following a meeting with the UK Prime Minister Theresa May in Lagos. May was in the country as part of a multi-stop trade tour of African nations ahead of the UK’s departure from the European Union in March 2019. Dangote Cement is worth an estimated US$7bn.

During the visit May said, “Already the finance and business links between Lagos and London are bringing enormous benefits to businesses and people in the UK and in Nigeria. London is a world-leading financial centre and, as the UK leaves the European Union, it will play an even greater role in financing the fastest-growing economies across Africa and the world.”

The rumours were confirmed yesterday when the UK’s Breedon Group announced its acquisition of Ireland’s Lagan Cement. The price was Euro527m, which Breedon will finance with a combination of a new loan, extended credit and an equity placing. The assets it will gain include a cement plant in Kinnegad, nine active quarries, 13 asphalt plants and nine ready-mixed concrete plants.

Breedon said that its strategy is to continue buying businesses in the heavyside construction materials market. At a stroke, once the deal completes on 20 April 2018, it becomes an international company. From the cement perspective it gains a new 0.7Mt/yr plant in central Ireland and a terminal in Belfast, UK. The UK Competition and Markets Authority (CMA) wasn’t mentioned in Breedon’s press release on the purchase but it seems unlikely that the competition body would have much to say on the transaction. Lagan Cement does hold ready-mix concrete (RMX) plants, aggregate and asphalt assets in Northern Ireland but these are far away from Breedon’s operations in mainland Britain. That said, the CMA did force Breedon to sell 14 RMX sites when it bought Hope Construction Materials in 2016. Generally speaking, Breedon’s enlargement reduces the diversity of the UK cement industry on the smaller end leaving only Quinn Cement, with operations on both sides of the border, as the country’s sole remaining single site clinker producer.

Aside from geographical expansion, becoming an international building materials company may offer Breedon Group some security from the UK’s exit from the European Union (EU) (so called Brexit). Breedon will join CRH as the only two cement producers with production facilities in both the UK and Ireland. The strategic significance of the position Breedon and CRH are in geographically may arise from whatever deal is reached between the EU and the UK and the significance of the UK’s only land border with the EU. LafargeHolcim is nearly in this club with its plants in England and Northern Ireland and plenty of the other local producers straddle the UK-EU border with terminals or production facilities elsewhere. Yet, in an uncertain Brexit negotiation, having kilns on both sides of the line might come in handy once (or if) the politicians make a decision.

Although, if Liam McCaffrey, the chief executive officer of Quinn Industrial Holding, is to be believed, then Brexit will have little impact at all other than (low) tariffs in a worst case scenario. He said to local press that although damage to the construction industry might arise in the UK from a prolonged recession, the UK’s housing shortage and reliance on imported building materials would probably see it through. That point about a possible financial downturn is important to Breedon Group, given the new debt it will be taking on to pay for acquisition. This is something that will be familiar to Breedon’s competitor Cemex. It is still paying off the debts from its acquisition of Rinker in 2007.

Breedon has decided to delay the release of its interim results from mid-July to September 2018 to allow time for the integration of Lagan into the group. Its sales and earnings may dwarf those from 2017 that it described as ‘one of the most productive years’ in its history. In the meantime congratulations are in order for Breedon Group for ensuring that the UK cement sector is never dull.

Ireland: Liam McCaffrey, the chief executive officer of Quinn Industrial Holdings does not expect Brexit to slow growth. He said that the most damage could arise from a prolonged recession in the UK, although he though it was unlikely, as reported bythe Irish Times newspaper. He added that the UK has a housing shortage and it relies on imports for building materials. In his estimation the worst-case scenario would be a tariffs on building materials but these, if they happened at all, are expected to be low.

The building materials producer and owner of Quinn Building Products reported that its turnover grew by 7.4% year-on-year to Euro209m in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBTIDA) increased by 31% to Euro23.9m.

“Despite the significant macro-economic challenges posed by Brexit, we continue to invest, grow sales, innovate and drive margin growth. Encouragingly, volume growth trends from 2017 are continuing year to date in 2018 and, at this point, we are firmly on track to deliver our fourth successive year of strong earnings growth,” said McCaffrey.