The latest CAB State of the Market Survey results highlight that despite the uncertainty that prevailed last year with Brexit, there is still significant confidence within the aluminium in building supply chain. The quarterly survey amongst members showed 86% net balance of respondents expecting sales to increase over the next 12 months and 73% in the next quarter (70% and 60% respectively in Q4, 2016). The figures once again compare favourably against the overall Construction sector (62% and 68% respectively) which did still manage to extend its period of growth to 4 years.
The effects of Sterling’s depreciation in the second half of 2016 have also been evident in members’ cost inflation. In Q1 overall cost balances were at their highest since the Surveys began. Sterling depreciated against the Euro and the Dollar in every quarter in 2016 (in annual terms) and was 10.4% lower against the Euro in Q1 and 13.4% lower against the Dollar. This has resulted in higher costs for imported raw materials – 95% net balance of CAB members reported increasing raw material costs. In addition the impact of rising global oil prices, combined with currency depreciation has begun to feed through into higher fuel (65% net balance) and energy costs (50% net balance). 86% of members expect overall cost inflation to persist over the next 12 months.
Demand was still considered the key constraint on sales growth (52% net balance) over the next 12 months with raw materials (24%) and Capacity (10%). A further 10% of CAB members believed there to be no constraints on activity in the year ahead.
Overall capacity levels were reported to be sufficient in Q1, given current aluminium in building sector output and demand. 28% of members expected to operate at 90% capacity over the year ahead. Capital investment remained one of the key priorities with the focus over the next 12 months being product improvement (58%), followed by Customer Research and e-business (both 53%).