The construction materials market value inched up marginally by approximately 1% y/y to around EUR 3bn in 2012, according to market estimates, even though initial projections were more optimistic. The building materials sector recorded encouraging performance in H1/2012, but in H2 the situation deteriorated, following the same tendency in construction activity. After the public spending before the June local elections drove upwards the construction (and construction materials) market, in Jul-Aug the political turmoil virtually froze investments in the sector. Subsequently, the government decided to pay a part of the state arrears to the construction companies, which helped the sector’s liquidity improve, but at the same time cut financing for infrastructure projects.
The construction materials sales were also negatively impacted by the draughty summer season and poor agricultural output. Traditionally, the sales of construction materials increase in September and October, as rural area inhabitants spend the amounts from selling crops for refurbishing of homes or even for new constructions (note: approximately 60% of the dwelling stock in Romania is in the rural area). However, in 2012 the construction material sales did not follow this seasonal pattern. The situation affected overall all domestic producers and particularly smaller players, as some 80% of the construction materials market is supplied by domestic manufacturers, according to market estimates.
While the cement segment benefited of the public spending for infrastructure works last year, the brick market is still facing diminishing demand, as its performance is linked to the construction of buildings, which continues on downward path. The number of completed dwellings dropped by 4.3% y/y last year, slowing down the decline compared to 2011 and 2010, yet remaining 10% below the 2007 level. Prospects for the future remain rather gloomy- in 2012, the number of building permits issued for residential constructions dropped by 4% y/y and reached the lowest level in the past seven years and was only by 10.2% above the 2004 level.
The outlook for the construction materials market in 2013 relies on the absorption of EU funds and the un-blocking of major public investment projects. In the long run, however, prospects are more optimistic and there is enough room for growth in the road construction segment (42% of the roads are not asphalt paved) as well as in construction and rehabilitation of buildings (roughly 80% of the dwelling stock is older than 20 years).