Energy: Price shock drives building material costs – ING

ING’s Maurice van Sante argues that higher Oil and Gas prices, driven by conflict in the Middle East, are set to raise costs in the European building materials sector. He notes that producers’ exposure to Oil and Gas is similar to 2022, so elevated energy prices are likely to be passed through, pressuring margins and construction activity.

Energy-driven cost pressures in materials

"Many sectors will be impacted by the current surge in energy prices caused by the conflict in the Middle East. As noted previously, producers of building materials such as cement, concrete and bricks rely heavily on energy. If energy prices remain high, these manufacturers are likely to pass increased costs on to construction companies, which will put pressure on profit margins and lead to higher overall building costs."

"In the period 2010-2020, the amount of oil as a heating source has decreased substantially in the sector, although it hasn’t witnessed a further decrease in the last five years. Between 2020-2025, companies mainly phased out the use of coal, while the relative amount of used gas has remained more or less the same for the last 15 years. Building material companies have become more sustainable due to the reduced reliance on coal, but the dependency on oil and gas hasn’t really decreased."

"The recent uptick in building permits offers a glimmer of hope for stronger demand, but a sustained recovery will depend on greater stability in energy markets and continued innovation in sustainable production methods. Without this, rising production costs risk pushing sales prices higher which, in turn, would weigh on demand. A firm commitment to greener, less energy‑intensive production processes will therefore be essential for long‑term resilience."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)