Posted by Stephan Siegle - 04 January, 2019
High demand, scarce capacity and growing cost pressures are currently leading to a paradigm shift in the construction materials market. Significant price increases are unavoidable. This is all the more reason to exploit to the full the potential of concrete admixtures and other construction chemicals solutions. Master Builders Solutions experts Herwig Heegewaldt, Ronald König and Uwe Kundel talk about the added value of quality products and competent advice.
In general, the price of a commodity is determined by supply and demand. Does that also apply to concrete?
Heegewaldt: Over the past few years, concrete prices have remained largely stable or have only risen slightly – despite annual rises in costs and high demand. Because of intensive competition, concrete producers and their suppliers attempted to compensate for the price pressure by cost reduction measures to the extent that this was possible. In Germany, the inflation rate in 2015 and 2016 was still near to 0%. However, in many markets, the relationship between supply and demand has now tilted in the other direction. We are seeing shortages of raw materials, services, qualified personnel, etc.
König: For some time, demand has been significantly in excess of supply on the construction materials market. In addition, the price pressure has grown over the years, making significant price increases for construction services and materials unavoidable. As a leading innovator in the field of concrete admixtures, Master Builders Solutions plays a key role in optimizing the cost and quality of concrete production and processing. Our products can also help in achieving significant long-term cost savings in many Areas.
What are the reasons for the growing pressure to increase prices?
Heegewaldt: Firstly, the German building trade is growing faster than it has done since German reunification. From January to May 2018, the sales revenue of the building industry in Germany was 7.5% above the figure for the corresponding prior-year period. There have therefore been significant rises in demand for raw materials for construction products, labour and logistics services, while the manufacturers are largely working to full capacity. As a result, prices are rising. In the logistics sector, transport volumes are continually increasing and are faced by a limited supply of transportation resources, especially truck drivers. There have also been significant increases in transport costs as a result of the extension of truck tolls and an increase in the toll rates. On many raw material markets, supply simply cannot be increased to keep pace with rising demand. Raw material prices are rising. Some raw materials such as sand are not even available in the quantities required in certain major cities. Key raw materials for concrete admixture production have also become scarce and considerably more expensive. For example, the price of ethylene has increased by 20% since 2016 and further price increases are impending in 2019. The prices of raw materials for plastic coatings, such as epoxy and polyurethane resins, have risen significantly and we expect further marked increases in 2019.
Does this mean that the building trade must expect price increases for concrete admixtures and other construction chemicals Solutions?
König: Yes, that is the case. This sector only saw slight price increases in 2016 and 2017 but now there is no alternative. However, we must remember that concrete admixtures only have a share of between one and five percent in the total cost of concrete formulations and they are therefore not the main factor which is driving costs up. They never have been and will not be in the future. On the other hand, the benefits they bring are considerable. With the right concrete admixtures, significant cost savings can be made at many Points.
Kundel: This also applies to coatings and waterproofing solutions. Considerable cost savings are possible with the right products, resulting in an optimized profile.
Does this mean that the use of construction chemicals is worthwhile not only in terms of quality but also as regards costs?
König: That is correct. In the meantime, scarcely any construction project can do without concrete admixtures, especially if the concrete needs to have special properties such as high flowing capacity or especially high strength. For example, the share of cement can be optimized using MasterGlenium without sacrificing quality, MasterSuna allows the use of sand which would otherwise be unsuitable for concrete production. MasterEase reduces the stickiness of concrete, makes concrete placing easier and relieves the burden on equipment. With MasterKure treatment products, costly complaints can be avoided. MasterSure optimizes consistency maintenance, MasterMatrix produces sturdy concrete that is easy to compact and considerably reduces the cost of concrete placing. These are only a few examples. Our competent technical service provides customers with support on site so that they can also realize these cost saving potentials in practice.
Construction chemicals from Master Builders Solutions not only ensure the optimum cost-benefit analysis for concrete formulations but also significantly improve the sustainability of the concrete and therefore also of the entire structure.
Does that also apply to other construction chemicals solutions?
Kundel: Yes it does, in principle. However, we are responsible for products which are applied directly on the construction site such as repair and waterproofing solutions or floor coverings. In the case of these solutions, a decision in favour of quality can also result in significant medium-term and long-term cost savings. The added value offered by our expert advice must also be taken into consideration. I do not only mean that customers feel well-supported by us. For example, if a foodstuff producer needs a new floor covering in its factory hall, we need to recommend tailor-made solutions that meet the very specific requirements of the project – not systems that are too complex or expensive and not a system that will rapidly fail when exposed to intensive cleaning. This is where our Ucrete flooring solution comes into its own. Customers can save considerable amounts by selecting the appropriate solution in line with their needs, but this is almost impossible without expert support because of the large number of products available in the marketplace.
Evidently, a certain amount of rethinking is required in the construction sector?
Heegewaldt: All the partners in the construction value stream need to adjust to the changed conditions. The objective cannot simply be to be “cheap” – we need to create value for our customers.
Kundel: it pays to choose quality – often, people do not accept this wisdom, which we already received from our grandparents. A product which has only one positive characteristic, a low price, can cause unpredictable follow-on expenses as repairs or even replacement may be necessary at a very early stage. Also, the processing of low-quality products is often so complex that the price saving is simply not worthwhile – for example, I am thinking of the waterproofing of surfaces with complex shapes which can be completed rapidly and effectively using high-quality liquid-applied waterproofing products. A solution that calls for slightly higher investment in the construction phase may be significantly more cost-effective over the entire life cycle. It would make sense for everyone concerned to consider these effects more intensively.
More information about our products: https://www.master-builders-solutions.basf.com