Ceramic Industry

Brick/Structural Clay Market Overview: Strong Housing Market Continues to Drive U.S. Brick Demand

December 1, 2005


According to Harvard University's Joint Center for Housing Studies (JCHS), single-family housing starts in the U.S. hit a record 1.6 million units in 2004, while multifamily starts remained within the same 330,000 to 350,000 unit range of the past eight years. With demand rising and prices soaring, condominium starts also increased last year to 121,000-up from only 71,000 the year before.1

All of these figures helped drive U.S. brick demand and prices higher. Berkshire Hathaway Inc. (Omaha, Neb.), which owns Acme Brick Co., reported that it saw a 4% increase in its brick and masonry product revenues in 2004, largely due to the favorable housing construction markets in the U.S, as well as higher selling prices. Vienna, Austria-based Wienerberger AG, said that its U.S. subsidiary, General Shale Brick, was able to increase revenues by 24% in 2004 because of a substantial rise in sales volumes and prices. And Hanson plc, based in London, UK, said that its heritage brick volumes were up 9.1% and prices by 2.6% in North America due to strong residential demand.

Worldwide, increased building activity in the Czech Republic, Slovenia and Romania helped boost brick demand in Eastern Europe, while Italy and Switzerland remained strong in Central-Western Europe. New residential construction in Germany remained weak but was offset by increased demand in Belgium, Holland and Scandinavia. Hanson reported that while housing starts and completions remained at a relatively high level, the gap between the two measures widened, suggesting an increased level of work in progress. As a result, brick demand in the UK was lower in 2004 compared to 2003 levels. In the Asia-Pacific region, Hong Kong, Malaysia and Singapore exhibited weak market demand.

In the first half of 2005, most companies posted double-digit increases in overall brick and building products revenues. In Eastern Europe, Poland and Hungary have shown significant declines in demand, but the construction markets in Czech Republic, Romania and Slovakia remain strong. In Central-Western Europe, rising brick sales are expected in Belgium, France, Italy and Switzerland, while demand in Germany and the UK is expected to remain weak. The markets in Hong Kong, Malaysia and Singapore are expected to remain challenging.

The U.S. housing market remained robust in the first half of 2005, and the commercial building market also began to recover. Hanson reported that its overall North American brick volumes fell by 2.1%, as strong sales in the East and in Texas were offset by reductions in Canada. However, price increases of 5.7% and further cost improvements enabled the company to more than offset an increase in natural gas costs. Hanson also reported good volumes and price increases in its roof tile business in the first half of the year. While the residential construction market was expected to slow in the second half of the year due to rising interest rates, companies anticipated that this slowdown would primarily affect the lower-priced segment that hardly uses brick. As a result, demand for face brick is forecast to remain strong.

Despite the positive overall outlook for brick demand, companies remain concerned about rising energy costs. As a result, investments in energy-efficient technologies and plants are expected to continue as brick manufacturers try to offset their increasing expenses.

Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases.

Reference

1. The State of the Nation's Housing 2005, Joint Center for Housing Studies of Harvard University, online at www.jchs.harvard.edu/publications/markets/son2005/son2005_bw.pdf.