Turkish Ready Mixed Concrete Association (THBB) announced the data of Turkish Statistical Institute (TÜİK), T.C. Central Bank and the Turkish Union of Chambers and Commodity Exchanges (TOBB) and the Ready-Mixed Concrete Sector Report, which was prepared in the light of the data and information provided by THBB and its members and scientifically analyzed the ready-mixed concrete industry for 2020. In the report, which drew attention to the shrinkage in recent years, it was mentioned that a “Construction Sector Strategy Document” should be prepared for the sustainable development of the country.
The ready-mixed concrete sector, represented by THBB, occupies a very important place in terms of the Turkish economy and the construction sector with its annual production of 77 million cubic meters, a turnover exceeding 17 billion Turkish liras, and an employment volume of more than 31 thousand according to 2019 data. Our country has been Europe’s leader in concrete production since 2009. Our industry makes a huge contribution to the construction industry and, consequently, to the national economy. This situation shows that ready-mixed concrete industry is the most fundamental branch of the construction industry.
The ready-mixed concrete industry showed a steady growth trend until 2017 when it reached its peak with an annual production of 115 million cubic meters. With the contraction of the construction sector in 2018 and the continuation of this trend, a sharp decline was experienced in 2019. The ready-mixed concrete industry has gone back to its situation 10 years ago with its production value in 2019. Along with the volume decrease, there was a significant decrease in the number of companies and facilities.
Ready-mixed concrete price fell well behind both PPI and CPI.
In 2020, while CPI increased by 14.6% and PPI by 25.2%, Ready-Mixed Concrete Price Index increased by only 11.3%. Ready-mixed concrete price remained well behind both PPI and CPI. In the light of this information published by TÜİK, it is seen that the news and press statements regarding the abnormal increase in the ready-mixed concrete price in 2020 are not realistic. Despite many negative developments such as the increase in raw material prices, the increase in interest rates and the fluctuation in demand, ready-mixed concrete producers could not keep the ready-mixed concrete price at the required level. Between 2016 and 2020, PPI increased by 128% and the USD rate increased by 158%. However, increase remained at 78% in ready-mixed concrete price. In short, there was a 50% loss compared to PPI.
Sudden and high increases in raw material prices have suffered the ready-mixed concrete producer
Due to fluctuating demand, rapidly changing conditions and uncertainties in 2020, problems were experienced in the sector’s cost and pricing (cost-oriented) policy. In particular, fixed price contracts suffered the ready-mixed concrete producer due to the sudden and high increase in raw material prices. Cash flow management, receivables and risk monitoring, and market analysis have also been issues that companies have faced with problems. Some firms closed or reduced their facilities and had to return to cash by selling their equipment to African and Middle Eastern countries. However, the sudden demand, which was unexpected after the pandemic, caught companies unprepared for equipment and personnel management. The high level of competition has been another factor that negatively affects manufacturers.
The sector is estimated to have grown between 17% and 22% in 2020
The ready-mixed concrete sector, which went through a period of ups and downs in 2020, managed to grow despite all the negativities. It is true that the main reason for this growth was the low levels of housing loan interest rates in the June-August period in order to increase the housing demand and, accordingly, to facilitate the start of new projects. However, the momentum captured by the increase in interest rates decreased later. It is estimated that the ready-mixed concrete industry grew between 17% and 22% in 2020.
Within the scope of the sector research, it is estimated that the ready-mixed concrete industry will remain the same as 2020 in the pessimistic scenario in 2021, and can grow by 9% in the optimistic scenario. As a result, when these two different scenarios meet at a common point, it can be said that the sectoral growth expectation for 2021 is around 5 percent.
Ready-mixed concrete sector cannot receive adequate support
Assessing the Ready-Mixed Concrete Sector Report, Yavuz Işık, Chairman of the Board of the Turkish Ready-Mixed Concrete Association, said that many reasons such as the bankruptcies and concordats in the construction sector in recent years, the extension of the terms, the unpredictable demand, the sudden increases in raw material prices, the high level of competition, and the investment items depending on the exchange rate have been leading manufacturers to shrink, not take risks and save the day. In addition to these, Yavuz Işık stated that ready-mixed concrete is an extremely sensitive and critical building material that needs to be transported and placed in its place within a short period of two hours after production, but it is negatively affected from factors such as lockdown hours, loading limits, allocation of space for facilities close to the city, and zoning issues. He also underlined that too much was expected from the ready-mixed concrete sector and the sector could not receive adequate support to achieve this.
“Construction Sector Strategy Document” should be prepared and implemented at once
Yavuz Işık stated that even though there are some new difficulties for the construction sector and ready-mixed concrete sector in our country, there are opportunities that may occur when looking at the big picture. Işık said: “The sustainable growth of construction sector and other sectors serving the construction sector can only be realized with a holistic development model. This model is also necessary for the sustainable development of the country. Therefore, a Construction Sector Strategy Document should be prepared and implemented as soon as possible. In accordance with this strategy, the ready-mixed concrete sector and all other relevant sectors should determine their own strategies and road maps “.
