Ready-mix concrete production hits biggest quarterly slump in 28 years

Stats NZ issued new data on ready-mix concrete. Photo / Michael Cunningham

Ready-mix concrete production slumped 23 per cent in the June quarter, the biggest drop since records began 28 years ago, Stats NZ said this week.

The seasonally adjusted drop was due to the Covid-19 level 4 lockdown when most construction work stopped and all non-essential business closed from late March to most of April.

Rob Gaimster, Concrete NZ chief executive, said today: "Had it not been for the lockdown for nearly six weeks earlier this year, this would have been a record year and the industry would have produced over 4 million cubic metres of concrete. It's been extremely hard."

Stats NZ said the second-highest drop in concrete production was a 15 per cent fall in early 2009 due to the global financial crisis hit.

New Zealand's ready-mix concrete production fell more than 20 per cent in most regions in the June 2020 quarter, Stats NZ said.

"The biggest regional fall in the quarter was in Canterbury, down 29 per cent, followed by Auckland region down 26 per cent and the combined Taranaki, Manawatu-Whanganui, Wellington region down 21 per cent," it said.

Seasonally adjusted, concrete production in the June 2020 quarter was down 23 per cent to 770,000 cubic metres, compared with more than 1 million cubic metres a quarter for almost every quarter for four years.

The drop in concrete production was equivalent to 22 Auckland Sky Towers or a single Burj Khalifa in Dubai, the world's tallest building, Stats NZ said.

Gaimster said he was not surprised about the 28-year low.

"It's expected when you shut the industry down [for that length of time]. You can't stockpile [ready-mix] concrete because it's a fresh product. There's only so much storage for aggregate and cement at ready-mix plants."

At least construction was able to continue nationally under the current level 2 alert level and Auckland's under alert level 3, he said. Building work was at healthy levels again.

The lockdown earlier this year hit the wider building industry so hard that the Construction Sector Accord was launched by Prime Minister Jacinda Ardern, ministers, and an industry group of 13 sector leaders.

That created a platform for industry and government to be kick-started and to address skills and labour shortages, unclear regulations, a lack of coordinated leadership, an uncertain pipeline of work and a culture of shifting risk, the accord said.

A Fletcher Building spokesperson said few insights could be taken from the last quarter.

"Following April where volumes were obviously significantly impacted by the lockdown, we've had a very strong May and June delivering to pent-up demand from customers.
Our ready-mix concrete business continues to be busy, but we're anticipating a reduction in activity. We're watching the market closely given recent events; actual activity levels may be materially different," the spokesperson said.

Fletcher this week announced a $196 million net loss after tax for the year to June 30, 2020, with operating earnings reduced by $150m. Half the loss provisions were due to reduced productivity at key legacy projects which had been "significantly disrupted" by Covid-19; 20 per cent from "a handful of historically completed" projects; and 30 per cent due to "a prudent risk provision".

In February, the Herald reported how Fletcher's Firth Industries had opened a new $10m plant in Mount Maunganui which could create enough concrete to lay the foundations of 30 houses in one day.

The certified ready-mix plant is expected to produce up to 900cu m of concrete per day and boost supply for the high-demand Bay of Plenty area.

Shane Brealey, a director of apartment/townhouse specialist NZ Living, said today the Stats NZ ready-mix concrete data showed a direct correlation with the level 4 lock-down.

"The June quarter is 13 weeks long say and we were down for about a week in March and four weeks in April so that's 30 per cent of that quarter.

"We came out of alert level 4 on April 28 and for a month through to May 28, Auckland Council relaxed site working hours and noise restrictions which enabled the construction sector to catch up some of the lost time."

The industry was grappling with establishing compliance protocols and ascertaining how to keep people safe while maintaining as much momentum as possible during the first lockdown, Brealey said.

"We all know so much more now. The industry is in better shape to deal with level 3 than it was first time around. Ideally, we get back to level 1 or 2 soon and hopefully we won't have to go through level 4 again."

Mark Binns, chairman of the Crown Infrastructure Partners, predicted September quarter concrete production would increase and return to pre-Covid levels, "even if we go in to an extended level 3. Clearly a return to level 4 would be bad news for the industry and hopefully some consideration has been given as to whether major projects of national or regional significance, where strict safety standards can be met, can continue even at this level."